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Board-Level Employee Representation and Risk Sharing Between Shareholders and Employees: Evidence from the German Codetermination Act of 1976

Julia Udoieva-Wagner & Marc Steffen Rapp

Journal of Institutional and Theoretical Economics2025https://doi.org/10.1628/jite-2025-0025article
AJG 2ABDC B
Weight
0.50

Abstract

With increasing concerns about the accountability of shareholder-oriented boards, board-level employee representation (BLER) is gaining momentum in public debate. Although BLER is not a new idea, there is little consensus about its economic effects. Using the enactment of the German Codetermination Act of 1976 as a quasi-natural experiment, we document two consequences of BLER. First, labor expenses of firms become less responsive to revenue, specifically in sectors with high labor turnover rates. Second, BLER increases operating leverage of firms. Overall, our findings are consistent with the view that BLER affects risk sharing between shareholders and employees.

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https://doi.org/https://doi.org/10.1628/jite-2025-0025

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@article{julia2025,
  title        = {{Board-Level Employee Representation and Risk Sharing Between Shareholders and Employees: Evidence from the German Codetermination Act of 1976}},
  author       = {Julia Udoieva-Wagner & Marc Steffen Rapp},
  journal      = {Journal of Institutional and Theoretical Economics},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1628/jite-2025-0025},
}

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Board-Level Employee Representation and Risk Sharing Between Shareholders and Employees: Evidence from the German Codetermination Act of 1976

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.