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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

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  • Koke, J.
  • Renneboog, L.D.R.

    (Tilburg University, Center for Economic Research)

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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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2003-78.

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Date of creation: 2003
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Handle: RePEc:dgr:kubcen:200378

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Web page: http://center.uvt.nl

Related research

Keywords: corporate governance; productivity growth; ownership and control; product market competition; financial distress;

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  1. Guercio, Diane Del & Hawkins, Jennifer, 1999. "The motivation and impact of pension fund activism," Journal of Financial Economics, Elsevier, vol. 52(3), pages 293-340, June.
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