Stakeholder Orientation and Firm Value

58 Pages Posted: 27 Dec 2018 Last revised: 30 Dec 2019

See all articles by Martijn Cremers

Martijn Cremers

University of Notre Dame; ECGI

Scott B. Guernsey

University of Tennessee - Department of Finance

Simone M. Sepe

University of Arizona - James E. Rogers College of Law; University of Toulouse 1 - Université Toulouse 1 Capitole; Toulouse School of Economics; European Corporate Governance Institute (ECGI)

Date Written: December 27, 2019

Abstract

We analyze the relation between enhanced director discretion to consider stakeholder interests (“stakeholder orientation”) and firm value by exploiting the adoption of directors’ duties laws (DDLs) as a quasi-natural experiment. We find that DDLs result in significant increases in shareholder value, especially in more innovative firms and those with stronger stakeholder relationships. DDLs also improve employees’ job security, financial soundness and innovation. These benefits, however, are offset in firms with more severe agency problems. Our results suggest that stakeholder orientation improves the commitment toward stakeholders and reduces contracting costs in many firms, but one size does not fit all.

Keywords: Stakeholder orientation, antitakeover statutes, firm value, bonding

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 (December 27, 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

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Scott B. Guernsey

University of Tennessee - Department of Finance ( email )

Haslam College of Business
Knoxville, TN 37996
United States

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

Toulouse School of Economics ( email )

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

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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