Jörg Heining, Simon Jäger, Benjamin Schoefer, 08 April 2020

Many countries, especially in Europe, are characterised by shared governance institutions that grant workers formal authority in firms’ decision-making. This column uses a natural experiment: a 1994 reform in Germany that abolished worker-elected directors in certain new firms and permanently preserved them in others, to provide empirical evidence on the effects of shared governance. It finds that shared governance can lead to an increase in capital formation and discusses the mechanisms which may lead to this result.

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