Alternative Corporate Governance Paradigm and Corporate Financing: Capital Structure Decisions in Employee-Governed Firms

Acta Oeconomica 65 (2), 271–297, 2015

Posted: 21 Dec 2012 Last revised: 19 Sep 2017

See all articles by Matjaz Crnigoj

Matjaz Crnigoj

Institute for Economic Research; University of Ljubljana - Faculty of Economics

Dusan Mramor

University of Ljubljana - Faculty of Economics

Date Written: January 1, 2015

Abstract

Assuming an alternative corporate governance paradigm that puts employees in the firm’s governance structures, as well as understanding their objective functions, we investigate capital structure decisions in an employee-governed firm. Examining corporate capital structure decisions in 12 European countries, we provide strong empirical evidence of employees’ conservatism in capital structure choice. We find that employee-governed firms operate with significantly lower leverage and that employee-governed firms are significantly less levered at the same amount of earnings volatility than firms governed by other stakeholders. We also find evidence that employee-governed firms, at least in some countries, rely on internal resources to a larger extent. However, we did not find evidence that employee-governed firms have to pledge more collateral to obtain debt financing. In addition to this, we find evidence that employee-governed firms choose debt of shorter maturity and, somewhat surprisingly, that employee-governed firms in some countries are faced with lower cost of debt compared to firms governed by other stakeholders and not higher cost of debt as expected because of credit rationing and limited borrowing capacity.

Keywords: corporate governance, employee-governed firm, capital structure, leverage, debt maturity, cost of debt

JEL Classification: G32

Suggested Citation

Crnigoj, Matjaz and Mramor, Dusan, Alternative Corporate Governance Paradigm and Corporate Financing: Capital Structure Decisions in Employee-Governed Firms (January 1, 2015). Acta Oeconomica 65 (2), 271–297, 2015. Available at SSRN: https://ssrn.com/abstract=2192502 or http://dx.doi.org/10.2139/ssrn.2192502

Matjaz Crnigoj (Contact Author)

Institute for Economic Research ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
+386 1 53 03 830 (Phone)
+386 1 53 03 874 (Fax)

HOME PAGE: http://www.ier.si

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Dusan Mramor

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
+386 1 589 2400 (Phone)
+386 1 589 2698 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
818
PlumX Metrics