Employee Treatment and Contracting with Bank Lenders: An Instrumental Approach for Stakeholder Management
Bill Francis, Iftekhar Hasan, Liuling Liu, Haizhi Wang
Journal of Business Ethics,
2019
Abstract
Adopting an instrumental approach for stakeholder management, we focus on two primary stakeholder groups (employees and creditors) to investigate the relationship between employee treatment and loan contracts with banks. We find strong evidence that fair employee treatment reduces loan price and limits the use of financial covenants. In addition, we document that relationship bank lenders price both the levels and changes in the quality of employee treatment, whereas first-time bank lenders only care about the levels of fair employee treatment. Taking a contingency perspective, we find that industry competition and firm asset intangibility moderate the relationship between good human resource management and bank loan costs. The cost reduction effect of fair employee treatment is stronger for firms operating in a more competitive industry and having higher levels of intangible assets.
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Indirect Effects of Unfair Employer Behaviour on Workplace Performance
Matthias Heinz, Sabrina Jeworrek, Vanessa Mertins, Heiner Schumacher, Matthias Sutter
VOX CEPR's Policy Portal,
2017
Abstract
Any organisation that needs to restructure, cut wages, or make layoffs needs to know how the employees who are not affected will respond. This column presents a field experiment which revealed that the perception that employers are unfair – in this case, as a result of layoffs – reduces the performance of employees who have not been not directly affected. As part of the experiment, experienced HR managers were able to successfully anticipate the consequences of unfair employer behaviour on unaffected workers.
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Size and Focus of a Venture Capitalist's Portfolio
Paolo Fulghieri, Merih Sevilir
Review of Financial Studies,
No. 11,
2009
Abstract
We take a portfolio approach to analyze the investment strategy of a venture capitalist (VC) and show that portfolio size and scope affect both the entrepreneurs' and the VC's incentives to exert effort. A small portfolio improves entrepreneurial incentives because it allows the VC to concentrate the limited human capital on a smaller number of startups, adding more value. A large and focused portfolio is beneficial because it allows the VC to reallocate the limited resources and human capital in the case of startup failure and allows the VC to extract greater rents from the entrepreneurs. We show that the VC finds it optimal to limit portfolio size when startups have higher payoff potential - that is, when providing strong entrepreneurial incentives is most valuable. The VC expands portfolio size only when startup fundamentals are more moderate and when he can form a sufficiently focused portfolio. Finally, we show that the VC may find it optimal to engage in portfolio management by divesting some of the startups early since this strategy allows him to extract a greater surplus.
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