Corporate Governance, Corporate and Employment Law, and the Costs of Expropriation

Giulio Ecchia, Martin Gelter and Piero Pasotti

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: We set up a model to study how ownership structure, corporate law and employment law interact to set the incentives that influence the decision by the large shareholder or manager effectively controlling the firm to divert resources from minority shareholders and employees. We suggest that agency problems between the controller and other investors and holdup problems between shareholders and employees are connected if the controller bears private costs of expropriating these groups. Corporate law and employment law may therefore somethimes be substitutes; employees may benefit from better corporate law intended to protect minority shareholder, and viceversa. Our model has implications for the domestic and comparative study of corporate governance structure and addresses, among other things, the question whether large shareholders are better able to bond with employees than dispersed ones, or whether the separation of ownership facilitates longterm relationships with labor.

JEL-codes: G30 K22 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Corporate Governance, Corporate and Employment Law, and the Costs of Expropriation (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp735

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