Institutions and preferences in settings of causal complexity: foreign institutional investors and corporate restructuring practices in France

Michel Goyer, Dong Kwan Jung, Ruth Aguilera

    Research output: Contribution to journalArticlepeer-review

    8 Citations (Scopus)
    398 Downloads (Pure)

    Abstract

    In this article, we illustrate how the interaction between institutional arrangements and the presence of different categories of firm stakeholders with specific preferences provides important insights to understand the conditions under which corporate restructuring practices are introduced. Institutions shape the range of actors' strategic options and mediate the translation of the preferences of firm stakeholders into corporate policies. Nonetheless, strategic choice remains possible since firm stakeholders constitute subgroups with different interests and incentives that influence how they operate in an institutional framework. In particular, we examine under what conditions UK/US-based institutional investors and equity-based compensation incentives are associated with the implementation of asset divestitures and employee layoffs in France. We uncover three key findings. First, the presence of hedge funds and equity-based pay influence the likelihood of French companies undertaking asset divestitures. Second, the impact of hedge funds on employee layoffs is contingent on the ownership structure of firms. Third, layoffs in France are driven by inferior performance – a result that contrasts with the American experience whereby employee layoffs are also used as a strategic mechanism to deal with institutional investors in good times. Our findings demonstrate the importance of the institutional constraints of (national level) employment protection and the moderating effects of ownership structure (firm level) on the strategic and employment policies of French companies.
    Original languageEnglish
    Pages (from-to)2062-2086
    JournalInternational Journal of Human Resource Management
    Volume26
    Issue number16
    Early online date10 Nov 2014
    DOIs
    Publication statusPublished - 1 Sept 2015

    Keywords

    • national institutional frameworks
    • CEO compensation
    • comparative corporate governance
    • employee layoffs
    • employment protection
    • France
    • institutional investors

    Fingerprint

    Dive into the research topics of 'Institutions and preferences in settings of causal complexity: foreign institutional investors and corporate restructuring practices in France'. Together they form a unique fingerprint.

    Cite this