Stakeholder Rights and Corporate Governance: A Cross-National Study of Hostile Takeovers

Abstract

We examine the role of three types of stakeholders in the uneven adoption of an organizational practice in different countries, arguing that organizational practices achieve widespread use only when they are consistent with the interests of the most powerful social actors as enshrined in legal rights. Building on a “stakeholder-power” approach to corporate governance, we examine whether the interests of shareholders, workers, and banks are consistent with the practice of hostile takeovers. Regressions using data on as many as 37 countries between 1988 and 1998 lend support to predictions that hostile takeovers increase in frequency with the extent to which shareholder rights are protected and decrease with the degree to which workers' and banks' rights are protected. We discuss the implications for the analysis of comparative institutions and for organizational theory.