Ebook Corporate Finance and Human Resource Management
In the narrowest definition, corporate governance is “the ways in which the suppliers of finance to corporations assure themselves of getting a return on their investment” (Shleifer and Vishny, 1997, p.737). Most studies on corporate governance in economics have traditionally used this narrow definition when they examined the corporate governance of individual companies or the systems of corporate governance in different countries.
Some recent research, however, started to stress the importance of understanding corporate governance more broadly as an institutional arrangement that involves not only managers and financiers but also other stakeholders such as workers, suppliers, and others. For example, Tirole (2001, p.4) defines corporate governance as “design of institutions that induce or force management to internalize the welfare of stakeholders.” Similarly Aoki (2001, p.281) defines corporate governance as “a set of self-enforceable rules (formal or informal) that regulates the contingent action choices of the stakeholders (investors, workers, and managers).”
When one takes these broader views of corporate governance, it becomes clear that a system of corporate governance consists of various sub-systems. For example, corporate governance certainly includes institution that governs the relation between managers and financiers (including both shareholders and creditors). In addition, corporate governance also includes the system of human resource management, which controls the relation between management and labor. Other institutions that regulate the relation between managers and other stakeholders, such as customers, suppliers, and sometimes local community in general, are also parts of corporate governance.
As Aoki (2001) points out, the various aspects of corporate governance are not combined randomly. Corporate governance is a system in the sense that these various sub-systems are integrated to reinforce each other. For example, financial arrangement that heavily relies on the market for corporate control in disciplining the managers may work better with human resource management that puts less emphasis on firm specific skills and on the job training than an alternative that stresses firm specific skills that are acquired on the job.
This paper examines such link between the financial aspect and the human resource management aspect of corporate governance. There is an increasing body of literature that considers the linkages between the sub-systems of (broadly defined) corporate governance. Many studies look at cross-country correlations of various aspects of the corporate governance. For example, Jackson (2004) find close correlation between the corporate finance and labor management practices at country level.
Some studies examine the linkage by comparing different firms within a country. For Japan, for example, Ahmadjian and Robinson (2001) find that the firms with high foreign ownership and low bank ownership are more likely to downsize their workforce. Also using the firm level data from Japan, Abe (2002) finds that the firms with close main bank ties adjust their employment only slowly. We follow a similar approach and study the linkage by looking at data from individual Japanese corporations. Japanese firms used to have a well known system of corporate governance with seemingly complementary sub-systems. Recently, some corporations started to show substantial deviations from the traditional characteristics in the corporate finance and in human resource management. We study if the recent changes in both aspects of corporate governance are related. We examine if the firms that have non-traditional corporate financing also tend to have non-traditional employment practices.
Download
PDF Ebook Corporate Finance and Human Resource Management
Posted in :
