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Is competition good for corporate performance? An analysis on German and Italian firms

This paper studies the relationship between financial pressure, product market competition and corporate governance on Total Factor Productivity growth using a sample of Italian and German very large manufacturing firms ranging from 1998 to 2006. In line with previous literature, increased financial pressure, as measured by bank debt and losses, stimulates TFP growth by putting management under more pressure both in Italian and German firms. However, results are different between the two countries for what concerns the impact of strong ownership and product market competition on productivity growth. In Germany, less product market competition induces a smaller TFP growth. This negative effect is mitigated if there is a strong shareholder. In particular, a strong foreign shareholder more than offset this negative effect. In Italy, there is evidence of a positive effect on TFP growth if there is a strong foreign shareholder. Taking into account the interaction between product market competition and corporate control, the effect of competition on TFP growth becomes smaller, while the positive effect associated with foreign ownership remains valid. Nonetheless, a general results shows that less product market competition, acting on management behavior, leads to higher productivity growth in Italian firms. I will argue that this is due to the peculiar Italian production structure and its reaction following the globalization shock.

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Abstract This paper studies the relationship between financial pressure, product market competition and corporate governance on Total Factor Productivity growth using a sample of Italian and German very large manufacturing firms ranging from 1998 to 2006. In line with previous literature, increased financial pressure, as measured by bank debt and losses, stimulates TFP growth by putting management under more pressure both in Italian and German firms. However, results are different between the two countries for what concerns the impact of strong ownership and product market competition on productivity growth. In Germany, less product market competition induces a smaller TFP growth. This negative effect is mitigated if there is a strong shareholder. In particular, a strong foreign shareholder more than offset this negative effect. In Italy, there is evidence of a positive effect on TFP growth if there is a strong foreign shareholder. Taking into account the interaction between product market competition and corporate control, the effect of competition on TFP growth becomes smaller, while the positive effect associated with foreign ownership remains valid. Nonetheless, a general results shows that less product market competition, acting on management behavior, leads to higher productivity growth in Italian firms. I will argue that this is due to the peculiar Italian production structure and its reaction following the globalization shock. 1

Laurea liv.II (specialistica)

Facoltà: Economia

Autore: Tomasz Boniek Contatta »

Composta da 63 pagine.

 

Questa tesi ha raggiunto 341 click dal 03/09/2008.

Disponibile in PDF, la consultazione è esclusivamente in formato digitale.