Does Stakeholder Orientation Improve Labor Investment Efficiency?

Exploiting the staggered enactment of state-level constituency statutes as an exogenous increase in stakeholder orientation, this paper examines whether, and if so, how stakeholder orientation affects labor investment efficiency. Following constituency statutes adoption, we find firms experience increased labor investment efficiency, with more pronounced effects in firms with higher shareholder-stakeholder conflicts and firms with greater potential managerial agency problems. Further analyses reveal that elevated stakeholder orientation increases labor investment efficiency more when firms have a board with low monitoring quality, face higher takeover risk, are more human capital intensive, and are run by male CEOs. Our findings highlight the importance of stakeholder orientation in efficiently allocating corporate labor resources