Stakeholder Corporate Governance: The Combined Effects of Bank Competition and Employment Protection

36 Pages Posted: 2 Jun 2014

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Kenichi Ueda

University of Tokyo - Faculty of Economics

Date Written: May 31, 2014

Abstract

Between the early-1970s and the mid-1990s, the U.S. banking sector was deregulated and U.S. workers gained more statuary basic protections. The effects of these two reforms on productive activity have largely been studied separately in the finance and labor literatures. Yet they only have separable impacts under classical production theories, abstracting from frictions and the roles of various stakeholders in corporate governance (e.g., related to bargaining between workers, creditors, and shareholders). Jointly estimating effects, we confirm that bank branch deregulation benefits industries highly dependent on external finance. Employment protection promotes knowledge-intensive industries, consistent with labor search theories with firm-specific investment, but not with neo-classical theories and many empirical studies. Importantly, we find interactions between the two reforms to matter for real economic activity, suggesting stakeholder corporate governance to be important.

Keywords: financial liberalization, employment protection, stakeholder corporate governance

JEL Classification: G34, G38, J08, J83

Suggested Citation

Claessens, Stijn and Ueda, Kenichi, Stakeholder Corporate Governance: The Combined Effects of Bank Competition and Employment Protection (May 31, 2014). Available at SSRN: https://ssrn.com/abstract=2444152 or http://dx.doi.org/10.2139/ssrn.2444152

Stijn Claessens (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Kenichi Ueda

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

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