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Stakeholder Governance, Competition and Firm Value

Author

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  • Franklin Allen
  • Elena Carletti
  • Robert Marquez

Abstract

In many countries, the legal system or social norms ensure that firms are stakeholder oriented. We analyze the advantages and disadvantages of stakeholder-oriented firms that are concerned with employees and suppliers compared to shareholder-oriented firms in a model of imperfect competition. Stakeholder firms are more (less) valuable than shareholder firms when marginal cost uncertainty is greater (less) than demand uncertainty. With globalization shareholder firms and stakeholder firms often compete. We identify the circumstances where stakeholder firms are more valuable than shareholder firms and compare these mixed equilibria with the pure equilibria with stakeholder and shareholder firms only. Finally, we analyze firm financial constraints and derive implications for the capital structure of stakeholder firms.

Suggested Citation

  • Franklin Allen & Elena Carletti & Robert Marquez, 2014. "Stakeholder Governance, Competition and Firm Value," CESifo Working Paper Series 4652, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4652
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp4652.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Stenbacka, Rune & Takalo, Tuomas, 2016. "Switching costs and financial stability," Research Discussion Papers 2/2016, Bank of Finland.
    2. repec:bof:bofrdp:urn:nbn:fi:bof-201603021033 is not listed on IDEAS
    3. Krüger, Philipp, 2015. "Corporate goodness and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 115(2), pages 304-329.
    4. repec:eee:jfinec:v:126:y:2017:i:1:p:122-146 is not listed on IDEAS

    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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