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Does employee ownership improve labour investment efficiency? Evidence from European firms

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  • Adwan, Sami

Abstract

This paper studies the impact of non-executive employee ownership on labour investment efficiency for a sample of European firms. It empirically documents a negative association between employee ownership and labour investment inefficiency, which serves an inverse measure of labour investment efficiency. This negative association is notably more pronounced for firms reporting higher discretionary accruals in their financial statements (i.e. firms with higher information asymmetry) and for those with a lower percentage of independent directors (i.e. firms with greater agency problems). As such, this paper offers evidence that employee shareholding enhances employment decisions through two channels: reduced information asymmetry and improved management monitoring.

Suggested Citation

  • Adwan, Sami, 2024. "Does employee ownership improve labour investment efficiency? Evidence from European firms," Economics Letters, Elsevier, vol. 238(C).
    • Handle: RePEc:eee:ecolet:v:238:y:2024:i:c:s0165176524002003
    DOI: 10.1016/j.econlet.2024.111717
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    1. Zhizhu Yuan & Junze Yu & Yue Yin, 2024. "The Impact of Corporate Social Responsibility on Labor Investment Efficiency: Evidence from China," Sustainability, MDPI, vol. 16(10), pages 1-29, May.

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    More about this item

    Keywords

    Labor investment efficiency; Employee ownership; Rank and file employees; Information asymmetry; Agency problems;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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