Labor and Corporate Governance: International Evidence from Restructuring Decisions

56 Pages Posted: 27 Apr 2006 Last revised: 17 Jun 2008

See all articles by Julian Atanassov

Julian Atanassov

University of Nebraska

E. Han Kim

University of Michigan, Stephen M. Ross School of Business

Abstract

Our results highlight the importance of interaction among management, labor, and investors in shaping corporate governance. We find that strong union laws protect not only workers but also underperforming managers. Weak investor protection combined with strong union laws are conducive to worker-management alliances, wherein poorly performing firms sell assets to prevent large scale layoffs, garnering worker support to retain management. Asset sales in weak investor protection countries lead to further deteriorating performance, whereas in strong investor protection countries they improve performance and lead to more layoffs. Strong union laws are less effective in preventing layoffs when financial leverage is high.

Keywords: Labor Laws, Stakeholders, Investor Protection, Management Turnover, Layoffs, Asset Sales, Financial Leverage, Ownership Concentration

JEL Classification: K31, J53, G34, J63, K22

Suggested Citation

Atanassov, Julian and Kim, E. Han, Labor and Corporate Governance: International Evidence from Restructuring Decisions. Journal of Finance, Forthcoming, Ross School of Business Paper No. 1044, Available at SSRN: https://ssrn.com/abstract=898702

Julian Atanassov

University of Nebraska ( email )

CBA
University of Nebraska, Lincoln
Lincoln, NE 68588
United States

E. Han Kim (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-764-2282 (Phone)
734-763-3117 (Fax)

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