Do Foreign Owners Favor Short-Term Profit? Evidence from Germany
AbstractComparing domestic- and foreign-owned firms in Germany, this paper finds that foreign-owned firms are more likely to focus on short-term profit. This influence is particularly strong if the local managers of the German subsidiary are not sent from the foreign parent company. Moreover, the physical distance between the foreign parent company and its German subsidiary increases the probability of focusing on short-term profit. These findings conform to the hypothesis that foreign owners facing an information disadvantage concerning the local conditions of their subsidiaries are more likely to favor short-term profit. However, we do not identify differences in “short- termism” between investors from “Anglo-Saxon” and other foreign countries; rather, results point in the direction of more general features of international business investment.
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Bibliographic InfoPaper provided by University of Trier, Department of Economics in its series Research Papers in Economics with number 2013-01.
Length: 33 pages
Date of creation: 2013
Date of revision:
Foreign Ownership; Short-Termism; Asymmetric Information; Globalization;
Other versions of this item:
- Dill, Verena & Jirjahn, Uwe & Smith, Stephen C., 2014. "Do Foreign Owners Favor Short-Term Profit? Evidence from Germany," IZA Discussion Papers 8165, Institute for the Study of Labor (IZA).
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- M16 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - International Business Administration
- P10 - Economic Systems - - Capitalist Systems - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-15 (All new papers)
- NEP-EUR-2013-12-15 (Microeconomic European Issues)
- NEP-IFN-2013-12-15 (International Finance)
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