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Banks and Labor as Stakeholders: Impact on Economic Performance
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Author/Editor: |
Claessens, Stijn | Ueda, Kenichi |
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September 1, 2008 |
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Electronic Access: |
Free Full Text (PDF file size is 298KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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Summary: Traditionally, the impacts of the rights of financial institutions and workers on corporate performance have been analyzed independently. Yet, theory clearly indicates that the combination of relative powers of different stakeholders affects a firm overall performance. Using U.S. state level and state-industry level data, we investigate how output growth is affected by bank branch deregulation and employment protection occurring over 1972-1993. We find that financial liberalization positively impact overall state growth but greater workers' rights affects it ambiguously. At the industry level, however, employment protection promotes those industries that are more knowledge intensive, while the effect of financial liberalization does not differ across industries that vary in external financing dependency. The results hold controlling for changes in shareholders' rights, which itself is not significant. The findings suggest that financial liberalization operates mostly through an efficiency channel, better reallocating resources across sectors, while employment protection creates higher incentives and encourages more sector-specific, human capital investments. Overall, the results show that the strength of stakeholders' protection affects performance through efficiency channels and provide support for a stakeholders' view of corporate governance.
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Order a print copy
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Series: |
Working Paper No. 08/229 |
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Subject(s): |
Banks | Labor | Corporate governance | Employment policy | Industrial investment | Industrial production | Economic models |
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Author's keyword(s): |
corporate governance | stakeholders | shareholders' maximization | financial liberalization | employment protection |
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Published: |
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September 1, 2008 |
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Format: |
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Paper |
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Stock No: |
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WPIEA2008229 |
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Pages: |
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39 |
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Price: |
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US$18.00 (Academic Rate: US$18.00 )
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