Abstract - Stakeholder Capitalism, Corporate Governance and Firm Value

We consider the advantages and disadvantages of stakeholder-oriented firms that are concerned with employees and suppliers as well as shareholders compared to shareholderoriented firms. Societies with stakeholder-oriented firms have higher prices, lower output, but greater firm value than shareholder-oriented societies. In some circumstances, firms may voluntarily choose to be stakeholder-oriented because this increases their value. Consumers that prefer to buy from stakeholder firms can also enforce a stakeholder society. Competition between stakeholder and shareholder firms in the context of globalization is not desirable for stakeholder firms but is for shareholder firms.

Franklin Allen
University of Pennsylvania, Wharton School
25.Apr 2006

Back to overview