The Law and Economics of Employee Participation in Corporations: A Study of China and Germany

Parties in a corporation do not always share the same interests. Such conflicts can be reduced by employees participating in corporate management or by sharing in financial benefits. In light of the significant revisions to provisions related to employees and employee participation in China’s 2023 Company Law, this thesis examines how employee participation has been developed and structured in China and its effects on employees and on firm performance. 

To answer this research question, this thesis employs a law and economics approach to provide economic justifications for employee participation. Building on existing empirical literature, this thesis demonstrates, through quantitative analysis, the positive effects of financial participation on the performance of Chinese state-owned enterprises. It also compares relevant regulations in China with those in Germany. Furthermore, it finds that employee participation in China has a unique social, political, and economic context, particularly influenced by Confucianism and socialism.