Employee Ownership, Board Representation, and Corporate Financial Policies
AbstractFrench law mandates that employees of publicly listed companies can elect two types of directors to represent employees. Privatized companies must reserve board seats for directors elected by employees by right of employment, while employee-shareholders can elect a director whenever they hold at least 3% of outstanding shares. Using a comprehensive sample of firms in the Société des Bourses Françaises (SBF) 120 Index from 1998 to 2008, we examine the impact of employee-directors on corporate valuation, payout policy, and internal board organization and performance. We find that directors elected by employee shareholders increase firm valuation and profitability, but do not significantly impact corporate payout policy. Directors elected by employees by right significantly reduce payout ratios, but do not impact firm value or profitability. Employee representation on corporate boards thus appears to be at least value-neutral, and perhaps value-enhancing in the case of directors elected by employee shareholders.
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Bibliographic InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/7306.
Date of creation: Sep 2011
Date of revision:
Publication status: Published in Journal of corporate finance, 2011, Vol. 17, no. 4. pp. 868-887.Length: 19 pages
Corporate boards; Privatization; Payout policy; Employee ownership;
Find related papers by JEL classification:
- J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
- J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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- Djaoudath Alidou, 2012. "Employees Equity Issue and Asymmetric Information:Evidence from France - Augmentations de capital réservées aux salariés et Asymétrie d’information:Cas de la France," Working Papers FARGO 1120901, Université de Bourgogne - Crego EA 7317/Fargo (Research center in Finance,organizational ARchitecture and GOvernance).
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