TY - JOUR
T1 - Does stakeholder orientation mitigate shareholder-employee conflicts? Evidence from a quasi-natural experiment
AU - Cumming, Douglas
AU - Lu, Fanyu
AU - Xu, Limin
AU - Yu, Chia-Feng
N1 - Publisher Copyright:
© 2025 The Authors
PY - 2025/4
Y1 - 2025/4
N2 - This paper examines the influence of stakeholder orientation on the shareholder-employee conflict characterized by the propensity of firms to engage in share purchases and leave employee pensions underfunded. Utilizing the enactment of US state-level constituency statutes, we find that firms in states that have adopted constituency statutes exhibit a weaker share repurchase-pension underfunding propensity, especially those with high default risk. The mechanism is through union intervention and labor representatives on boards. The effect is moderated for firms headquartered in high-social-capital regions, operating with higher human capital, possessing a history of employee litigation, and maintaining lower and short-horizon institutional ownership. After implementing constituency statutes, share repurchase announcements are associated with lower returns for firms with higher pension deficits. Our findings suggest that stakeholder orientation can discipline the shareholder-employee conflict.
AB - This paper examines the influence of stakeholder orientation on the shareholder-employee conflict characterized by the propensity of firms to engage in share purchases and leave employee pensions underfunded. Utilizing the enactment of US state-level constituency statutes, we find that firms in states that have adopted constituency statutes exhibit a weaker share repurchase-pension underfunding propensity, especially those with high default risk. The mechanism is through union intervention and labor representatives on boards. The effect is moderated for firms headquartered in high-social-capital regions, operating with higher human capital, possessing a history of employee litigation, and maintaining lower and short-horizon institutional ownership. After implementing constituency statutes, share repurchase announcements are associated with lower returns for firms with higher pension deficits. Our findings suggest that stakeholder orientation can discipline the shareholder-employee conflict.
KW - Constituency statutes
KW - Employee pensions
KW - Share repurchase
KW - Stakeholder orientation
UR - http://www.scopus.com/inward/record.url?scp=85215625232&partnerID=8YFLogxK
U2 - 10.1016/j.jcorpfin.2025.102736
DO - 10.1016/j.jcorpfin.2025.102736
M3 - Article
SN - 0929-1199
VL - 91
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
M1 - 102736
ER -