The effect of corporate takeovers on the efficiency and equity of employee relations
The primacy of shareholder value – which places emphasis on a company’s stock price and profits – means firms often rely on financial markets and takeovers to drive growth and profitability. While this strategy is usually justified by arguments of efficiency and value creation, empirical studies suggest it may contribute to income inequality, erode workers' rights, and impede overall economic growth. This research proposal explores the impact of takeovers on contractual negotiations, firm efficiency, and the tension between profit maximisation and broader social outcomes at a microeconomic level.
I will use the principal-agent framework to model the conditions under which managers may undermine a firm's and its workers' interests. Drawing on examples from a variety of corporate structures that are employee-inclusive (e.g. in Germany, Japan, or organisations with employee stock ownership), I will develop a theoretical framework to examine the relationship between corporate structures, relational contracts, and firm efficiency. I will then explore how takeovers may disrupt trust and alter contracting dynamics when information asymmetry and power imbalances are present. This research project bridges two questions: how do managers' incentives shape their dealings with workers, and how do these microeconomic forces drive the wider socioeconomic impacts of financialization?
This is especially relevant today, as the Corporate Social Responsibility debate is growing louder and firms are being pushed to consider social equity and sustainability in their strategy, in line with the stakeholder value approach. My ambition is that this research will inform competition and financial policies that promote both equality and economic performance.