Stakeholder Capitalism, Corporate Governance and Firm Value

Stakeholder Capitalism, Corporate Governance and Firm Value

Franklin Allen, Elena Carletti, Robert Marquez

Series number :

Serial Number: 
190/2007

Date posted :

October 01 2007

Last revised :

December 06 2018
SSRN Suggested citation Download this paper Open PDF Share

Keywords

  • Firm objective • 
  • co-determination • 
  • imperfect competition

In countries such as Germany, the legal system ensures that firms are stakeholder oriented. In others, like Japan, social norms achieve a similar effect. We analyze the advantages and disadvantages of stakeholder-oriented firms that are concerned with employees and suppliers compared to shareholder-oriented firms in a model of imperfect competition.

Stakeholder firms are more (less) valuable than shareholder firms when marginal cost uncertainty is greater (less) than demand uncertainty. With globalization shareholder firms and stakeholder firms often compete. We identify the circumstances where stakeholder firms are more valuable than shareholder firms, and compare these mixed equilibria with the pure equilibria with stakeholder and shareholder firms only. The results have interesting implications for the political economy of foreign entry.

Authors

Fellow, Research Member
Imperial College Business School, Brevan Howard Centre
Real name: 
Elena Carletti
Real name: 
Robert Marquez