Abstract: Our results highlight the importance of interaction among management, labor, and investors in shaping corporate goverance. We find that strong union laws protect not only workers but also underperforming managers. Weak investor protection combined with strong union laws are conducive to worker-management alliances, wherein poorly performing firms sell assets to prevent large-scale layoffs, garnering worker support to retain management. Asset sales in weak investor protection countries lead to further deteriorating performance, whereas in strong investor protection countries they improve performance and lead to more layoffs. Strong union laws are less effective in preventing layoffs when financial leverage is high.
Author(s): JULIAN ATANASSOV and E.HAN KIM
Labor and Corporate Governance_International Evidence from Restructuring Decisions.PDF
