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Labor and Corporate Governance: International Evidence from Restructuring Decisions

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  • JULIAN ATANASSOV
  • E. HAN KIM
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    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. Copyright (c) 2009 The American Finance Association.

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    Bibliographic Info

    Article provided by American Finance Association in its journal The Journal of Finance.

    Volume (Year): 64 (2009)
    Issue (Month): 1 (02)
    Pages: 341-374

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    Handle: RePEc:bla:jfinan:v:64:y:2009:i:1:p:341-374

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    Cited by:
    1. repec:cuf:journl:y:2013:v:14:i:1:n:2:albuquerque is not listed on IDEAS
    2. Jiao, Yawen, 2010. "Stakeholder welfare and firm value," Journal of Banking & Finance, Elsevier, vol. 34(10), pages 2549-2561, October.
    3. Ginglinger, Edith & Megginson, William & Waxin, Timothée, 2011. "Employee ownership, board representation, and corporate financial policies," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 868-887, September.
    4. Kim, E. Han & Lu, Yao, 2011. "CEO ownership, external governance, and risk-taking," Journal of Financial Economics, Elsevier, vol. 102(2), pages 272-292.
    5. Albuquerque, Rui & Miao, Jianjun, 2006. "CEO Power, Compensation and Governance," CEPR Discussion Papers 5818, C.E.P.R. Discussion Papers.
    6. Easterwood, John C. & İnce, Özgür Ş. & Raheja, Charu G., 2012. "The evolution of boards and CEOs following performance declines," Journal of Corporate Finance, Elsevier, vol. 18(4), pages 727-744.
    7. Alex Edmans & Lucius Li & Chendi Zhang, 2014. "Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around The World," NBER Working Papers 20300, National Bureau of Economic Research, Inc.
    8. Paige Ouimet & Rebecca Zarutskie, 2011. "Acquiring Labor," Working Papers 11-32, Center for Economic Studies, U.S. Census Bureau.
    9. Efraim Benmelech & Nittai K. Bergman & Ricardo Enriquez, 2011. "Negotiating with Labor Under Financial Distress," NBER Working Papers 17192, National Bureau of Economic Research, Inc.
    10. Muravyev, Alexander & Berezinets, Irina & Ilina, Yulia, 2012. "Корпоративные Конфликты И Политика Фирм В Области Занятости И Заработной Платы
      [Corporate Governance Conflicts and Employment and
      ," MPRA Paper 40215, University Library of Munich, Germany.
    11. Tommaso Monacelli & Vincenzo Quadrini & Antonella Trigari, 2011. "Financial Markets and Unemployment," NBER Working Papers 17389, National Bureau of Economic Research, Inc.
    12. Waxin, Timothée, 2010. "The Impact of Founding-Family Ownership on Labor Relations : Evidence from French Workplace-Level Data," Economics Papers from University Paris Dauphine 123456789/5892, Paris Dauphine University.
    13. Jackson, Scott B. & Rodgers, Theodore C. & Tuttle, Brad, 2010. "The effect of depreciation method choice on asset selling prices," Accounting, Organizations and Society, Elsevier, vol. 35(8), pages 757-774, November.

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