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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.

Suggested Citation

  • Naohito Abe & Satoshi Shimizutani, 2005. "Employment Policy and Corporate Governance: An Empirical Comparison of the Stakeholder versus the Profit-Maximization model," Hi-Stat Discussion Paper Series d05-92, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hst:hstdps:d05-92
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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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    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.
    2. Sanford M. Jacoby, 2007. "Principles and Agents: CalPERS and corporate governance in Japan," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(1), pages 5-15, January.

    More about this item

    Keywords

    corporate governance; employment downsizing; multivariate probit model;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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