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| Author: | Benelli, G. Loderer, C. Lys, T. |
| Title: | Labor participation in corporate policy-making decisions: West Germany's experience with codetermination |
| Journal: | Journal of Business
1987 : OCT, VOL. 60:4, p.553-575 |
| Index terms: | EMPLOYEE PARTICIPATION BUSINESS POLICY |
| Language: | eng |
| Abstract: | Codetermination is analyzed by assuming that employees maximize the value of their financial claim on the firm. Since that claim is prior to the one of stockholders, workers will favor less risky investments, higher and less variable salaries, reduced dividends and debt-equity ratios, and a more capital-intensive production process. Unless these effects are offset by an increased productivity by raising workers' morale and satisfaction or a reduction of information asymmetries within the firm, shareholder wealth and firm value will suffer. The effects of codetermination laws in West Germany are investigated. Surprisingly, little evidence is found that codetermination has any effect on corporate operations and performance. |
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