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State Ownership, Socio-political Factors, and Labor Cost Stickiness

The European accounting review, 2018-08, Vol.27 (4), p.771-796 [Peer Reviewed Journal]

2017 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. 2017 ;ISSN: 0963-8180 ;EISSN: 1468-4497 ;DOI: 10.1080/09638180.2017.1329659

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  • Title:
    State Ownership, Socio-political Factors, and Labor Cost Stickiness
  • Author: Prabowo, Ronny ; Hooghiemstra, Reggy ; Van Veen-Dirks, Paula
  • Is Part Of: The European accounting review, 2018-08, Vol.27 (4), p.771-796
  • Description: This article examines the effect of state ownership on the labor cost stickiness of firms in 22 European countries. States are more likely to interfere in the decision-making processes of state-owned enterprises (SOEs) and demand firm activities that are desirable from a socio-political perspective. For example, to win political support, politicians may instruct SOEs to avoid layoffs to minimize unemployment rates. The varied objectives of SOEs also make it more difficult to control managers' behavior, leaving more room for managerial discretion and the pursuit of self-interests through empire-building behavior. Both state intervention and managerial self-interest restrain managers from laying off employees or reducing employee wages when sales decrease, which may lead to greater labor cost stickiness. Data from 1993 to 2012 reveal that SOEs exhibit greater labor cost stickiness than private firms, and their labor cost stickiness also varies predictably with socio-political variables such as election years and left-wing governments.
  • Publisher: Routledge
  • Language: English
  • Identifier: ISSN: 0963-8180
    EISSN: 1468-4497
    DOI: 10.1080/09638180.2017.1329659
  • Source: Taylor & Francis Open Access
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