Having a Finger in the Pie: Labor Power and Corporate Payout Policy

Financial Management, Forthcoming

45 Pages Posted: 25 Apr 2018

See all articles by In-Mu Haw

In-Mu Haw

Texas Christian University - M.J. Neeley School of Business

Bingbing Hu

Hong Kong Baptist University (HKBU)

Donghui Wu

The Chinese University of Hong Kong; Center for Institutions and Governance

Xu Zhang

University of Macau

Date Written: January 1, 2018

Abstract

Exploiting time-series data on labor laws from 39 countries, we investigate how labor power influences firms’ payouts. We find that legislative changes that strengthen labor power reduce firms’ dividend payments and total payouts. The payout restriction effect of labor power is more pronounced in firms with greater labor intensity and in firms operating in countries with broader collective bargaining coverage and more effective law enforcement. Tightened operating flexibility and excess wage extraction are two plausible channels through which labor power affects payouts. These findings indicate that labor power is another important country-wide institution that shapes corporate payout policy.

Keywords: labor power, shareholder protection, dividend payments, payout policy, rent extraction

JEL Classification: J5, G35, G38, D72

Suggested Citation

Haw, In-Mu and Hu, Bingbing and Wu, Donghui and Zhang, Xu, Having a Finger in the Pie: Labor Power and Corporate Payout Policy (January 1, 2018). Financial Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3156871

In-Mu Haw

Texas Christian University - M.J. Neeley School of Business ( email )

Fort Worth, TX 76129
United States
817-921-7563 (Phone)
817-921-7227 (Fax)

Bingbing Hu (Contact Author)

Hong Kong Baptist University (HKBU) ( email )

Department of Economics
Kowloon, Hong Kong
Hong Kong

Donghui Wu

The Chinese University of Hong Kong ( email )

Sha Tin
N.T.
Hong Kong
852-3943 7836 (Phone)
852-2603 5114 (Fax)

HOME PAGE: http://www.bschool.cuhk.edu.hk/staff/wu-donghui/

Center for Institutions and Governance ( email )

Room 1033, 10/F
Cheng Yu Tung Building, No. 12 Chak Cheung Street
Hong Kong
China

HOME PAGE: http://www.bschool.cuhk.edu.hk/centres/centre-for-institutions-and-governance/

Xu Zhang

University of Macau ( email )

Macau

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