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Stakeholder Orientation and Product Quality

  • Date 2020-03-10 (Tue)
  • Time 02:30 PM
  • Venue Conference Room B110
  • Presider Professor Kong-Pin Chen
  • Speaker Professor Po-Hsuan Hsu
  • Background Professor Hsu received his Ph.D. in Finance from Columbia University in 2007. He is currently a Visiting Professor at National Tsing Hua University. His research interests are Asset pricing, technological innovations, entrepreneurship, and financial econometrics.
  • Abstract This paper analyzes the effect of enhanced director discretion to consider stakeholder interests on product quality by exploiting the quasi-natural experiment provided by the staggered adoption of directors’ duties laws in 35 U.S. states from 1984 to 2016. We find that these laws result in significantly less product recalls, and such relation is more pronounced among firms with weaker relationships with employees and supply chain partners. We also find that stakeholder orientation leads to higher product ratings from customers, more new product lines, higher KLD scores in employee and products and lower employee turnover. Our results suggest that enhanced stakeholder orientation improves product quality by providing better employee treatment and by maintaining a stable relationship with suppliers.