Banks and Labor as Stakeholders: Impact on Economic Performance
IMF Working Papers, September 1, 2008
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- Banks and Labor as Stakeholders: Impact on Economic Performance
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Bibliographic details
- Authors: Kenichi Ueda, Stijn Claessens
- Published: September 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451870879.001
Summary and research question
- Traditionally, the impacts of the rights of financial institutions and workers on corporate performance have been analyzed independently.
- Theory indicates that the combination of relative powers of different stakeholders affects a firm overall performance.
- This study investigates how output growth is affected by bank branch deregulation and employment protection occurring over 1972-1993 using U.S. state level and state-industry level data.
Data and scope
- Geographic scope: United States (state level and state-industry level).
- Time period examined: 1972-1993.
- Unit of analysis: State growth and industry-level growth across industries varying in knowledge intensity and external financing dependency.
Key empirical findings
- Financial liberalization positively impact overall state growth.
- Greater workers' rights affects overall state growth ambiguously.
- At the industry level:
- Employment protection promotes those industries that are more knowledge intensive.
- 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.
- Interpretation of channels:
- Financial liberalization operates mostly through an efficiency channel, better reallocating resources across sectors.
- Employment protection creates higher incentives and encourages more sector-specific, human capital investments.
- Overall conclusion: The strength of stakeholders' protection affects performance through efficiency channels and provide support for a stakeholders' view of corporate governance.
Policy implications and interpretation
- Financial liberalization may enhance aggregate growth by improving resource allocation across sectors (efficiency channel).
- Employment protection may encourage investments in sector-specific human capital and thus promote growth in knowledge-intensive industries.
- Shareholders' rights changes were not significant in these results, suggesting stakeholder balance between banks and labor plays a distinct role.
Content in this bundle
- 3. State-Indistry Level Regressions—Benchmark