Employment Policy and Corporate Governance: An Empirical Comparison of the Stakeholder versus the Profit-Maximization model

Naohito Abe () and Satoshi Shimizutani

Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

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.

Keywords: corporate governance; employment downsizing; multivariate probit model (search for similar items in EconPapers)
JEL-codes: G30 J23 (search for similar items in EconPapers)
Date: 2005-06
New Economics Papers: this item is included in nep-bec, nep-dcm, nep-his and nep-sea
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:hst:hstdps:d05-92

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