ror.org/00wk3s644
Abstracts
Abstract
Employee stock ownership gives employees a voice and therefore may have a major impact on corporate governance. Thus, employee stock ownership may be a powerful mean to protect CEOs from both market for corporate control and dismissal threat. In this paper, we examine the relationship between employee stock ownership and CEO entrenchment. Following the recent French legislative changes, we use a comprehensive panel dataset of the major French listed companies over the 2009-2012 period. We document inverted U-shaped relationships between employee stock ownership and CEO entrenchment. Board employee ownership representation also plays a role and increases the inflexion points of these curvilinear relationship.
Keywords:
- employee stock ownership,
- corporate governance,
- CEO entrenchment
Résumé
L’actionnariat salarié est susceptible d’avoir un impact majeur sur la gouvernance des entreprises. En effet, ces mécanismes peuvent s’avérer décisifs pour faire échouer une prise de contrôle hostile ou pour permettre aux dirigeants d’écarter les menaces de renvoi. Dans le cadre de cet article, nous examinons le lien potentiel entre actionnariat salarié et enracinement managérial. Notre étude empirique examine cette question au moyen d’un échantillon d’entreprises cotées, analysées sur une période récente (2009-2012). Nos résultats montrent la présence d’une relation significative en U inversé entre le niveau d’actionnariat salarié et l’enracinement managérial. La présence de représentants des actionnaires salariés au sein des conseils d’administration ou de surveillance a également un impact en faisant varier les points d’inflexion des relations observées.
Mots-clés :
- actionnariat salarié,
- gouvernance de l’entreprise,
- enracinement des dirigeants
Resumen
La propiedad de acciones de los empleados da voz a los empleados y por lo tanto puede tener un impacto importante en el gobierno corporativo. Por ello, la propiedad de acciones por parte de los empleados puede ser un poderoso medio para proteger a los CEO tanto del mercado para el control corporativo como de la amenaza de despido. En este artículo, examinamos la relación entre la propiedad de acciones de los empleados y el afianzamiento del CEO. Tras los recientes cambios legislativos franceses, utilizamos un amplio conjunto de datos de panel de las principales empresas francesas cotizadas durante el periodo 2009-2012 y encontramos una relación con forma de U invertida entre la propiedad de acciones de los empleados y el afianzamiento del CEO. La representación de la propiedad del empleado en la junta también desempeña un papel relevante al incrementar el punto de inflexión de esta relación curvilínea.
Palabras clave:
- ppropiedad de acciones de empleados,
- gobierno corporativo,
- atrincheramiento CEO
Appendices
Bibliography
- Acharya, Viral V.; Myers, Stewart C.; Rajan, Raghuram G (2011). “The Internal Governance of Firms”, Journal of Finance, vol. 66, n°3, p. 689-720.
- Adams, Renee B.; Ferreira, Daniel (2007). “A theory of friendly boards”, The Journal of Finance, vol. 62, n°1, p. 217-250.
- Adams, Renee B.; Hermalin, Benjamin E.; Weisbach, Michael S (2010). “The role of boards of directors in corporate governance: A conceptual framework and survey”, Journal of Economic Literature, vol. 48, n°1, p. 58-107.
- Arellano, Manuel; Bond, Stephen (1991). “Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations”, The review of economic studies, vol. 58, n°2, p. 277-297.
- Aste, Laura J. (1999). “Reforming French corporate governance: A return to the two-tier board”, George Washington journal of international law and economics, vol. 32, n°1.
- Atanassov, Julian; Kim, E Han (2009). “Labor and Corporate Governance: International Evidence from Restructuring Decisions”, Journal of Finance, vol. 64, n°1, p. 341-374.
- Aubert, Nicolas; Garnotel, Guillaume; Lapied, André; Rousseau, Patrick (2014). “Employee ownership: A theoretical and empirical investigation of management entrenchment vs. reward management”, Economic Modelling, vol. 40, p. 423-434.
- Balsmeier, Benjamin; Bermig, Andreas, & Dilger, Alexander (2013). “Corporate governance and employee power in the boardroom: An applied game theoretic analysis”, Journal of Economic Behavior & Organization, vol. 91, p. 51-74.
- Beatty, Ann (1995). “The cash flow and informational effects of employee stock ownership plans”, Journal of Financial Economics, vol. 38, n°2, p. 211-240.
- Benartzi, Shlomo.; Thaler, Richard. H., Utkus, Stephen P.; Sunstein, Cass R. (2007). “The law and economics of company stock in 401 (k) plans”, Journal of law and economics, vol. 50, n°1, p. 45-79.
- Bertrand, Marianne, & Mullainathan, Sendhil (2003). “Enjoying the Quiet Life? Corporate Governance and Managerial Preferences”, Journal of Political Economy, vol. 111, n°5, p. 1043-1075.
- Bhagat, Sanjay; Jefferis, Richard H. (2005). The econometrics of corporate governance studies: MIT Press.
- Blair, Margaret M.; Kruse, Douglas L.; Blasi, Joseph R (2000). “Employee ownership: an unstable form or a stabilizing force?”, in M. M. K. Blair, Thomas A. (Ed.), The new relationship: human capital in the American corporation (p. 241-298). Washington D.C.: Brookings Institution Press.
- Blair, Margaret M.; Roe, Mark J. (Eds.). (1999). Employees and corporate governance. Washington, DC: Brookings Institution Press.
- Blundell, Richard; Bond, Stephen (1998). “Initial conditions and moment restrictions in dynamic panel data models”, Journal of econometrics, vol. 87, n°1, p. 115-143.
- Boone, Audra L.; CasaresField, Laura; Karpoff, Jonathan M.; Raheja, Charu G (2007). “The determinants of corporate board size and composition: An empirical analysis”, Journal of Financial Economics, vol. 85, n°1, p. 66-101.
- Bova, Francisco, Dou, Yiwei; Hope, Ole-Kristian (2015). “Employee ownership and firm disclosure”, Contemporary Accounting Research, vol. 32, n°2, p. 639-673.
- Castanias, Richard P.; Helfat, Constance E (1992). “Managerial and windfall rents in the market for corporate control”, Journal of Economic Behavior & Organization, vol. 18, n°2, p. 153-184.
- Castanias, Richard P.; Helfat, Constance E. (2001). “The managerial rents model: theory and empirical analysis”, Journal of Management, vol. 27, p. 661-678.
- Chang, Saeyoung (1990). “Employee stock ownership plans and shareholder wealth: an empirical investigation”, Financial Management, vol. 19, n°1, p. 48-58.
- Chang, Saeyoung; Mayers, David (1992). “Managerial vote ownership and shareholder wealth: evidence from employee stock ownership plans”, Journal of Financial Economics, vol. 32, n°1, p. 103-131.
- Chaplinsky, Susan; Niehaus, Greg (1994). “The role of ESOPs in takeover contests”, Journal of Finance, vol. 49, n°4, p. 1451-1470.
- Chen, Huafeng; Kacperczyk, Martin; Ortiz-Molina, Hernan (2012). “Do Nonfinancial Stakeholders Affect the Pricing of Risky Debt? Evidence from Unionized Workers”, Review of Finance, vol. 16, n°2, p. 347-383.
- Cramton, Peter; Mehran, Hamid; Tracy, Joseph (2008). “ESOP Fables: The Impact of Employee Stock Ownership Plans on Labor Disputes. Federral Reserve Bank of New York.
- Cronqvist, Henrik; Heyman, Fredrik; Nilsson, Mattias; Svaleryd, Helena; Vlachos, Jonas (2009). “Do Entrenched Managers Pay Their Workers More?”, Journal of Finance, vol. 64, n°1, p. 309-339.
- Faleye, Olunbunmi (2007). “Classified boards, firm value, and managerial entrenchment”, Journal of Financial Economics, vol. 83, n°2, p. 501-529.
- Faleye, Olunbunmi, Mehrotra, Vikash; Morck, Randall (2006). “When labor has a voice in corporate governance”, Journal of Financial & Quantitative Analysis, vol. 41, n°3, p. 489-510.
- Fauver, Larry; Fuerst, Michael E. (2006). “Does good corporate governance include employee representation? Evidence from German corporate boards”, Journal of Financial Economics, vol. 82, n°3, p. 673-710.
- Fisman, Ray J.; Khurana, Rakesh; Rhodes-Kropf, Matthew; Yim, Soojin (2013). “Governance and CEO turnover: Do something or do the right thing?”, Management Science, vol. 60, n°2, p. 319-337.
- Gamble, John E. (2000). “Management commitment to innovation and ESOP stock concentration”, Journal of Business Venturing, vol. 15, n°5-6, p. 433-447.
- Ginglinger, Edith; Megginson, William; Waxin, Timothee (2011). “Employee ownership, board representation, and corporate financial policies”, Journal of Corporate Finance, vol. 17, n°4, p. 868-887.
- Gordon, Lilli A.; Pound, John (1990). “ESOPs and corporate control”, Journal of Financial Economics, vol. 27, n°2, p. 521-551.
- Goyal, Vikas. K.; Park, Chul W (2002). “Board leadership structure and CEO turnover”, Journal of Corporate Finance, vol. 8, n°1, p. 49-66.
- Greene, William H. (2012). Econometric analysis (7th ed., International ed.). Boston: Pearson.
- Gregory-Smith, Ian; Thompson, Steve; Wright, Peter W (2009). “Fired or retired? A competing risks analysis of chief executive turnover”, the Economic Journal, vol. 119, n°536, p. 463-481.
- Guedri, Zied; Hollandts, Xavier (2008). “Beyond dichotomy: the curvilinear impact of employee ownership on firm performance”, Corporate Governance: An International Review, vol. 16, n°5, p. 460-474.
- Haans, Richard F.; Pieters, Constant; He, Zi-Lin (2016). “Thinking about U: theorizing and testing U-and inverted U-shaped relationships in strategy research”, Strategic Management Journal, vol 37, n°7, p. 1177-1195.
- Hellwig, Martin (2000). “On the economics and politics of corporate finance and corporate control”, in Vives X. (Ed.), Corporate Governance: Theoretical and Empirical Perspectives. Cambridge, UK: Cambridge University Press.
- Hermalin, Benjamin E.; Weisbach, Michael S (2000). Boards of Directors as an Endogenously Determined Institution: A Survey of Economic Literature. Working Paper.
- Hill, Charles W. L.; Phan, Phillip (1991). “CEO tenure as a determinant of CEO pay”, Academy of Management Journal, vol. 34, n°3, p. 707-717.
- Hill, Charles W. L., & Snell, Scott A (1988). “External control, corporate strategy, and firm performance in research-intensive industries”, Strategic Management Journal, vol. 9, n°6, p. 577-590.
- Jensen, Michael C (1986). “Agency cost of free cash flow, corporate finance, and takeovers”, American Economic Review, vol. 76, n°2, p. 323-329.
- Johnson, Scott G.; Schnatterly, Karen; Hill, Aaron D (2012). “Board composition beyond independence social capital, human capital, and demographics”, Journal of Management, vol 39, n°1, p. 232-262.
- Joseph, John; Ocasio, William; McDonnell, Mary-Hunter (2014). “The structural elaboration of board independence: Executive power, institutional logics, and the adoption of CEO-only board structures in US corporate governance”, Academy of Management Journal, vol. 57, n°6, p. 1834-1858.
- Kaarsemaker, Erik (2006). Employee ownership and its consequences: synthesis-generated evidence for the effects of employee ownership and gaps in the research literature. University of York.
- Kim, E Han; Maug, Ernst G.; Schneider, Christoph (2014). “Labor representation in governance as an insurance mechanism”, European Corporate Governance Institute (ECGI)-Finance Working Paper (411).
- Kim, E. Han; Ouimet, Paige (2014). “Broad-based employee stock ownership: motives and outcomes”, Journal of Finance, vol. 69, n°3, p. 1273-1319.
- Kruse, Douglas; Freeman, Richard B.; Blasi, Joseph R. “(2010). Shared capitalism at work: employee ownership, profit and gain sharing, and broad-based stock options”, National Bureau of Economic Research conference report. Chicago: The University of Chicago Press.
- Linck, James S.; Netter, Jeffry M.; & Yang, Tina (2008). “The determinants of board structure”, Journal of Financial Economics, vol. 87, n°2, p. 308-328.
- Lind, Jo T., & MEHLUM, Halvor (2010). “With or without U? the Appropriate Test for a U-Shaped Relationship”, Oxford bulletin of economics and statistics, vol. 72, n°1, p. 109-118.
- McConnell, John J.; Servaes, Henri (1990). “Additional evidence on equity ownership and corporate value”, Journal of Financial Economics, vol. 27, n°2, p. 595-612.
- Pagano, Marco; Volpin, Paolo F (2005). “Managers, workers, and corporate control”, Journal of Finance, vol. 60, n°2, p. 841-868.
- Park, Saeyoung., & Song, Moon H (1995). “Employee stock ownership plans, firm performance, and monitoring by outside blockholders”, Financial Management, vol. 24, n°4, p. 52-65.
- Pugh, William N.; Oswald, Sharon L.; & Jahera Jr., J. S (1999). “ESOPs, Takeover Protection, and Corporate Decision-Making”, Journal of Economics and Finance, vol. 23, n°2, p. 170-185.
- Raheja, Charu G (2005). “Determinants of Board Size and Composition: A Theory of Corporate Boards”, Journal of Financial & Quantitative Analysis, vol. 40, n°2, p. 283-306.
- Rapp, Thomas; Aubert, Nicolas (2011). “Bank employee incentives and stock purchase plans participation”, Journal of Financial Services Research, vol. 40, n°3, p. 185-203.
- Rauh, Joshua D (2006). “Own company stock in defined contribution pension plans: A takeover defense?”, Journal of Financial Economics, vol. 81, n°2, p. 379-410.
- Scholes, Miron S.; Wolfson, Mark A (1990). “Employee stock ownership plans and corporate restructuring: myths and realities”, Financial Management, vol. 19, n°1, p. 12-28.
- Semadeni, Matthew, Withers, Michael C., & Certo Trevis S. (2014). “The perils of endogeneity and instrumental variables in strategy research: Understanding through simulations”, Strategic Management Journal, vol. 35, n°7, p. 1070-1079.
- Tihanyi, Laszlo, Graffin, Scott, & George, Gerard (2014). “Rethinking governance in management research”, Academy of Management Journal, vol. 57, n°6, p. 1535-1543.
- Wintoki, Babajide M.; Linck, James S.; Netter, Jeffry M (2012). “Endogeneity and the dynamics of internal corporate governance”, Journal of Financial Economics, vol. 105, n°3, p. 581-606.
- Yermack, David (1996). “Higher market valuation of companies with a small board of directors”, Journal of Financial Economics, vol. 40, n°2, p. 185-211.
- YiTsung, Lee; Yu-Jane, Liu; Ning, Zhu (2008). “The Costs of Owning Employer Stocks: Lessons from Taiwan”, Journal of Financial & Quantitative Analysis, vol. 43, n°3, p. 717-740.