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Shareholder Interests, Human Capital Investment and Corporate Governance

Author

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  • Roberts, John

    (Stanford U)

  • Van den Steen, Eric

Abstract

Corporations simultaneously claim that human capital is increasingly important to their success and that they seek to maximize shareholder value. This paper studies the relationship between these two developments. We show that the pursuit of shareholder interests may require ceding a role in corporate governance to employees in order to motivate their investing in firm-specific human capital. Doing so becomes more attractive as these investments increase in importance. This result also bears on the debate about reforming European and Japanese governance systems in the direction of the American system, reducing employees' influence. In this context, we present a model on the optimal choice of governance systems, along ideas suggested by Holmstrom.

Suggested Citation

  • Roberts, John & Van den Steen, Eric, 2000. "Shareholder Interests, Human Capital Investment and Corporate Governance," Research Papers 1631, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:1631
    as

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    File URL: http://gsbapps.stanford.edu/researchpapers/library/rp1631.pdf
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    References listed on IDEAS

    as
    1. Milgrom, Paul & Roberts, John, 1994. "Complementarities and systems: Understanding japanese economic organization," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 9(1), pages 3-42.
    2. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    3. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    4. Oliver Hart & John Moore, 1998. "Cooperatives vs. Outside Ownership," NBER Working Papers 6421, National Bureau of Economic Research, Inc.
    5. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    6. repec:hrv:faseco:30728046 is not listed on IDEAS
    7. Patrick Bolton & Chenggang Xu, 1999. "Ownership and Managerial Competition: Employee, Customer, and Outside Ownership," CID Working Papers 20A, Center for International Development at Harvard University.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Cecile Cezanne-Sintes, 2008. "Modern corporate changes: reinstating the link between the nature, boundaries and governance of the firm," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(4), pages 447-461.
    2. Mansur Lubabah Kwambo & Ahmad Bawa Abdul-Qadir, 2013. "Dispersed Equity Holding and Financial Performance of Banks in Nigeria," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(1), pages 238-247, January.
    3. Tang, Heiwai, 2012. "Labor market institutions, firm-specific skills, and trade patterns," Journal of International Economics, Elsevier, vol. 87(2), pages 337-351.
    4. Olivier Sautel & Cécile Cézanne-Sintès, 2007. "Firme intensive en capital humain et coordination : vers une redéfinition du rapport entre intégration et dé-intégration," Post-Print hal-00331454, HAL.
    5. Olivier Sautel & Cécile Cézanne, 2007. "The Human Capital-Intensive Firm and Coordination: Redefined Integration and Disintegration," Working Papers hal-00628647, HAL.
    6. Matthias Benz & Bruno S. Frey, "undated". "Corporate Governance: What can we Learn from Public Governance?," IEW - Working Papers 166, Institute for Empirical Research in Economics - University of Zurich.
    7. Vicente Salas-Fumas, 2010. "Governance of Knowledge-Intensive Firms in the Modern Market Economy," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 17(3), pages 349-372.
    8. David Kelsey & Frank Milne, 2008. "Imperfect Competition and Corporate Governance," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1115-1141, December.
    9. Subramanian Rangan & Metin Sengul, 2009. "Information technology and transnational integration: Theory and evidence on the evolution of the modern multinational enterprise," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(9), pages 1496-1514, December.
    10. Olivier Sautel & Cécile Cézanne, 2007. "The Human Capital-Intensive Firm and Coordination: Redefined Integration and Disintegration," CEPN Working Papers hal-00628647, HAL.
    11. Olabode Adeleke Oyewunmi & Omotayo Adewale Osibanjo & Hezekiah Oluwabusayo Falola & Olusola Joshua Olujobi, 2017. "Optimization by Integration: A Corporate Governance and Human Resource Management Dimension," International Review of Management and Marketing, Econjournals, vol. 7(1), pages 265-272.
    12. Matthias Benz & Bruno S. Frey, 2006. "Towards a Constitutional Theory of Corporate Governance," IEW - Working Papers 304, Institute for Empirical Research in Economics - University of Zurich.

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