Stakeholder Orientation and Firm Value

56 Pages Posted: 27 Dec 2018 Last revised: 7 Aug 2019

See all articles by Martijn Cremers

Martijn Cremers

University of Notre Dame

Scott B. Guernsey

University of Cambridge - Judge Business School

Simone M. Sepe

University of Arizona - James E. Rogers College of Law; University of Toulouse 1 - Université Toulouse 1 Capitole; IAST - Fondation Jean-Jacques Laffont - TSE; European Corporate Governance Institute (ECGI)

Date Written: April 1, 2019

Abstract

This paper analyzes the relation between enhanced director discretion to consider stakeholder interests (“stakeholder orientation”) and firm value by considering the quasi-natural experiment provided by the staggered adoption of directors’ duties laws in 35 U.S. states from 1984 to 2006. We find that these laws result in significant increases in shareholder value, especially for firms that are larger, more complex or innovative and with stronger stakeholder relationships. Our results suggest that stakeholder orientation creates value for some firms by reducing contracting costs with stakeholders and mitigating the externalities stakeholders may bear due to conflicts of interests with shareholders.

Keywords: directors’ duties statutes, stakeholder orientation, firm value, antitakeover statutes, bonding hypothesis, stakeholder relationships, endogenous risks, innovation

JEL Classification: G32, G34, K22, O32

Suggested Citation

Cremers, K. J. Martijn and Guernsey, Scott B. and Sepe, Simone M., Stakeholder Orientation and Firm Value (April 1, 2019). Available at SSRN: https://ssrn.com/abstract=3299889 or http://dx.doi.org/10.2139/ssrn.3299889

K. J. Martijn Cremers (Contact Author)

University of Notre Dame ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

Scott B. Guernsey

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Simone M. Sepe

University of Arizona - James E. Rogers College of Law ( email )

P.O. Box 210176
Tucson, AZ 85721-0176
United States

University of Toulouse 1 - Université Toulouse 1 Capitole ( email )

2 Rue du Doyen-Gabriel-Marty
Toulouse, 31042
France

IAST - Fondation Jean-Jacques Laffont - TSE ( email )

21 allée de Brienne
31015 Toulouse Cedex 6
Toulouse Cedex, F-31042
France

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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