Workers on the board and long-term investment in German companies

Sigurt Vitols, Berlin Social Science Center (WZB)
Robert Scholz, Berlin Social Science Center (WZB)

» Full paper: ilera-2019-paper-289-Vitols.pdf

An increasing amount of research is showing that companies are becoming more short-term in their investment time horizons, i.e. companies are sacrificing long-term investments (even though they would be profitable) in order to increase their short-term payments to shareholders in the form of dividends and share buybacks. Up to now, this literature has not examined the influence that board-level employee representation (BLER) may have on company investment time horizons. Using a unique six-component measure of codetermination strength in German companies, the Mitbestimmungsindex (MB-ix), this paper shows that BLER has a positive influence in lengthening company investment time horizons.