Law Commons^™

Corporate Governance, Corporate And Employment Law, And The Costs Of Expropriation, Giulio Ecchia, Martin Gelter, Piero Pasotti

Faculty Scholarship

We set up a model to study how ownership structure, corporate law and employment law interact to set the incentives that infl uence the decision by the large shareholder or manager effectively controlling the fi rm to divert resources from minority shareholders and employees. We suggest that agency problems between the controller and other investors and holdup problems between shareholders and employees are connected if the controller bears private costs of “expropriating” these groups. Corporate law and employment law may therefore somethimes be substitutes; employees may benefi t from better corporate law intended to protect minority shareholder, and vice versa. …