Do Corporate Control and Product Market Competition Lead to Stronger Productivity Growth? Evidence from Market-Oriented and Blockholder-Based Governance Regimes

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Abstract

This study investigates the impact of corporate governance and product market competition on total factor productivity growth for two large samples of German and UK firms. In poorly performing UK firms, the presence of strong outside blockholders lead to substantial increases in productivity. Contrarily, for German poorly performing and distressed firms, it is bank debt concentration which stimulates productivity growth. Whereas high bank debt concentration also supports productivity growth in German profitable firms, leverage is unrelated to productivity growth in UK firms. Weak product market competition in the UK has a negative impact on productivity growth of in both widely-held firms and concentrated firms with the exception of firms controlled insiders (directors). These seem able to generate productivity increases in firms subject to little market discipline. For profitable German firms, the relation between strong blockholder control and productivity growth is limited. Only control by banks, insurance firms and the government can somewhat reduce the negative effect of weak product market competition.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages39
Volume2003-78
Publication statusPublished - 2003

Publication series

NameCentER Discussion Paper
Volume2003-78

Fingerprint

Blockholders
Governance
Product market competition
Corporate control
Productivity growth
Productivity
Bank debt
Market discipline
Corporate governance
Total factor productivity growth
Insider
Insurance
Government
Leverage

Keywords

  • corporate governance
  • productivity growth
  • ownership and control
  • product market competition
  • financial distress

Cite this

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title = "Do Corporate Control and Product Market Competition Lead to Stronger Productivity Growth? Evidence from Market-Oriented and Blockholder-Based Governance Regimes",
abstract = "This study investigates the impact of corporate governance and product market competition on total factor productivity growth for two large samples of German and UK firms. In poorly performing UK firms, the presence of strong outside blockholders lead to substantial increases in productivity. Contrarily, for German poorly performing and distressed firms, it is bank debt concentration which stimulates productivity growth. Whereas high bank debt concentration also supports productivity growth in German profitable firms, leverage is unrelated to productivity growth in UK firms. Weak product market competition in the UK has a negative impact on productivity growth of in both widely-held firms and concentrated firms with the exception of firms controlled insiders (directors). These seem able to generate productivity increases in firms subject to little market discipline. For profitable German firms, the relation between strong blockholder control and productivity growth is limited. Only control by banks, insurance firms and the government can somewhat reduce the negative effect of weak product market competition.",
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Do Corporate Control and Product Market Competition Lead to Stronger Productivity Growth? Evidence from Market-Oriented and Blockholder-Based Governance Regimes. / Koke, J.; Renneboog, L.D.R.

Tilburg : Finance, 2003. (CentER Discussion Paper; Vol. 2003-78).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

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KW - corporate governance

KW - productivity growth

KW - ownership and control

KW - product market competition

KW - financial distress

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