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Employment Policy and Corporate Governance: An Empirical Comparison of the Stakeholder versus the Profit-Maximization model

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  • Naohito Abe
  • Satoshi Shimizutani

Abstract

Japan's economic problems over the past decade and a half have triggered far reaching changes in the country's corporate governance system and there have been significant changes in both companies' ownership structures and composition of board members. This paper examines how board and ownership structures affect firms' decision as to how to reduce labor costs when firms face excess employment. Our findings confirm that outside directors are more inclined to implement layoffs and voluntary or early retirement, while insiders are more likely to decrease new hiring and protect incumbent employees. These findings are consistent with the stakeholder view of the firm rather than the neoclassical view of firms as profit-maximizers.

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File URL: http://hi-stat.ier.hit-u.ac.jp/research/discussion/2005/pdf/D05-92.pdf
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Bibliographic Info

Paper provided by Institute of Economic Research, Hitotsubashi University in its series Hi-Stat Discussion Paper Series with number d05-92.

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Date of creation: Jun 2005
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Handle: RePEc:hst:hstdps:d05-92

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Keywords: corporate governance; employment downsizing; multivariate probit model;

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Cited by:
  1. Luke Nottage, 2006. "Nothing New in the (North) East? Interpreting the Rhetoric and Reality of Japanese Corporate Governance," Governance Working Papers 21819, East Asian Bureau of Economic Research.

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