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Employment Adjustment and Controlling-minority Ownership Structures: Providing Evidence for Stewardship Governance

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  • Ming-Yuan Chen
  • Wei-Ting Chiu

Abstract

This study investigates the influence of controlling-minority ownership structures (CMSes) on the employment adjustment of firms. We propose that entrepreneur-operated CMS firms typically develop a stewardship governance structure, which relies heavily on the social and psychological context of trust between management and employees, and demands employment stability. Accordingly, firms with more deeply ingrained CMSes are expected to have a lower employment adjustment speed. By applying a partial adjustment model to a sample of Taiwanese firms, we show that firms continually adjust to achieve a target employment level. The empirical proxy variables for the extent of CMSes are negatively related to the adjustment speed, particularly among firms with above-target employment or having consecutive periods of loss. Our results are robust after considering the assumption of lump-sum adjustment behavior. (JEL codes: D22, G34, J21)

Suggested Citation

  • Ming-Yuan Chen & Wei-Ting Chiu, 2017. "Employment Adjustment and Controlling-minority Ownership Structures: Providing Evidence for Stewardship Governance," CESifo Economic Studies, CESifo Group, vol. 63(1), pages 97-118.
    • Handle: RePEc:oup:cesifo:v:63:y:2017:i:1:p:97-118.
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    References listed on IDEAS

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    1. Okamoto, Hisashi & Matsuura, Tsukasa, 2015. "The Influence of Corporate Governance on Long-term Employment:A Study Using Data on Japanese Listed Firms," MPRA Paper 64561, University Library of Munich, Germany.
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    6. Lucian A. Bebchuk & Reinier Kraakman & George Triantis, 2000. "Stock Pyramids, Cross-Ownership, and Dual Class Equity: The Mechanisms and Agency Costs of Separating Control from Cash-Flow Rights," NBER Chapters, in: Concentrated Corporate Ownership, pages 295-318, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    employment adjustment; controlling-minority ownership structures; stewardship; partial adjustment model;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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