Does codetermination reduce shareholder value? Board-level employee representation, firms’ market value, and operational performance

Eulerich, Marc; Fligge, Benjamin; Imdieke, Andy

doi:10.2139/ssrn.3729150

Cited by 2 publications

(2 citation statements)

References 37 publications

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“…Thereby, firms, where equal representation is applied, underperform by 31% of those with one-third of worker representatives on the board. In a recent study involving German firms, Eulerich et al (2020) uncover evidence that codetermination reduces, on average, firms' value. Moreover, the authors' findings reveal that employees are able to extract benefits from shareholders through increases in salaries and in employees' number and decrease the value of dividends paid to shareholders; these effects are mitigated by the presence of strong shareholder monitors or high analyst coverage.…”

Section: Literature Review and Research Hypothesesmentioning

confidence: 99%

Does board-level employee representation impact firms’ value? Evidence from the European countries

Silva

Machado

2022

JFRC

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Purpose Using, for the first time, a sample of European listed firms from 30 countries with different legal regimes of board-level employee representation (BLER), the purpose of this paper is to examine the impact of BLER on firms’ value of European public companies, where employee representation is voluntary or imposed by law depending on the country of origin. Design/methodology/approach Using a difference-in-differences approach and a matching procedure, the authors analyze the impact of BLER on firms' value. Findings The results of this paper suggest that BLER adopted voluntarily affects positively firms’ value comparing to a group of firms where employee representation is in some way mandatory. Moreover, the findings of this paper show that firms from countries where BLER is not imposed by law tend to pay higher dividends. Nevertheless, the evidence presented in this paper only holds for low levels of employee representation on the board. Research limitations/implications This research not only provides some evidence in favor of the codetermination on corporate governance but also offers new avenues for discussing the conditions necessary for codetermination to be effective, especially the level of employees' participation on board. Practical implications This study provides to policymakers new insights for them to gain perspective, analyze and decide if codetermination is a useful tool to improve firms’ performance or at least in what conditions it should be applied. Social implications This study incentives the discussion of the proper way to include workers in firms’ boards with expected benefits on firms’ performance, economies and societies. Originality/value This paper provides evidence of a positive (but limited) impact on firms’ value derived from voluntary codetermination.

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Section: Literature Review and Research Hypothesesmentioning

confidence: 99%

Does board-level employee representation impact firms’ value? Evidence from the European countries

Silva

Machado

2022

JFRC

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“…Campagna et al (2020) argue and find that employees use this influence to reduce the firm's focus on efficiency. For example, codetermined firms are more likely to be overstaffed and pay higher wages (Eulerich et al, 2023).…”

Section: Efficiency-based Strategiesmentioning

confidence: 99%

Analyzing the strategy–performance relationship in Germany – can we still use the common strategic frameworks?

Eulerich

Fligge

2023

JSMA

Self Cite

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PurposeThis study examines the strategy–performance relationship within publicly traded German firms. Strategic management literature provides several strategic frameworks that offer guidance on promising strategies. However, given major changes, such as globalization, managers wonder whether strategic frameworks are still applicable.Design/methodology/approachThe authors employ principal component analysis (PCA) to measure competitive strategy and analyze a sample of 6,037 firm-years among 651 firms between 2000 and 2019.FindingsWhile the authors find evidence for the existence of efficiency-based strategies, differentiation-based strategies and mixed strategies, only differentiation-based strategies are positively related to performance.Originality/valueThe study’s results contribute to the discourse on the strategy–performance relationship, as they provide insights into promising strategies that are of interest to researchers and practitioners. Further, the authors introduce a new measure of competitive strategy based on PCA.

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Does codetermination reduce shareholder value? Board-level employee representation, firms’ market value, and operational performance

Cited by 2 publications

References 37 publications

Does board-level employee representation impact firms’ value? Evidence from the European countries

Does board-level employee representation impact firms’ value? Evidence from the European countries

Analyzing the strategy–performance relationship in Germany – can we still use the common strategic frameworks?

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