CAPITAL, LABOR, AND THE FIRM: A STUDY OF GERMAN CODETERMINATION

摘要: Under the German corporate governance system of codetermination, employees are legally allocated control rights over assets through seats on supervisory board—that is, board nonexecutive directors. The oversees management board—the executive directors—approves or rejects its decisions, and appoints members sets their salaries. We empirically investigate implications this sort labor participation in decision making. find that companies with equal representation shareholders trade at a 31% stock market discount as compared where employee representatives fill only one-third seats. show under representation, compensation provides incentives not conducive to furthering shareholders' interests, possibly because maximizes different objective function than shareholders. document that, have longer payrolls peers have. Finally, we provide evidence respond allocation by linking firm performance leveraging up firm. (JEL: G32, G34)