Stakeholder Orientation and Firm Value
56 Pages Posted: 27 Dec 2018 Last revised: 7 Aug 2019
Date Written: April 1, 2019
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: Suggested Citation