Employee representation and financial leverage

• 成果类型: Article
• 署名作者: Lin, Chen; Schmid, Thomas; Xuan, Yuhai
• 署名单位: University of Hong Kong; University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2017.12.003
• 发表日期: 2018
• 页码: 303-324
• 关键词: capital structure; financial leverage; employee representation; Labor rights; Bank ownership

摘要

We analyze how direct employee voice affects financial leverage. German law mandates that firms' supervisory boards consist of an equal number of employees' and owners' representatives. This requirement, however, applies only to firms with more than two thousand domestic employees. We exploit this discontinuity and the law's introduction in 1976 for identification and find that direct employee power increases financial leverage. This is explained by a supply side effect: as banks' interests are similar to those of employees, higher employee power reduces agency conflicts with debt providers, leading to better financing conditions. These findings reveal a novel mechanism of direct employee influence. (C) 2017 Elsevier B.V. All rights reserved.