The Emerging Market for European Corporate Governance: The Relationship between Governance and Capital Expenditures, 1997-2005

41 Pages Posted: 19 Nov 2007

See all articles by Rob Bauer

Rob Bauer

Maastricht University

Robin Braun

Maastricht University

Gordon L. Clark

Oxford University - Smith School of Enterprise and the Environment

Date Written: November 9, 2007

Abstract

We examine European corporate governance with respect to the relationship between shareholder value and capital investment. Based upon Europe's largest listed companies, it is shown that Anglo-American conceptions of shareholder value are increasingly important for European firms whatever their home jurisdictions and inherited traditions. Using annual capital expenditures as a proxy for corporate managers' commitment to shareholder value it is shown contra arguments to the effect that the map of European corporate governance regimes is fixed and virtually immutable, even large firms from paradigmatic stakeholder regimes believed focused upon long-term value increasingly act to maximise short-term shareholder value. We divide Europe into three regions based on ownership concentration, legal systems, board structures, and the presence of corporate governance codes. In this multi-jurisdictional setting, we compare the effects of different elements of corporate governance on capital expenditures in each region. Our analysis shows that the overall effect of investor-sensitive corporate governance on capital expenditures is consistently negative notwithstanding differences in the formal nature and quality of governance standards between regions. We explain this finding by reference to the governance standards of United Kingdom: a market for corporate governance that has come to dominate its continental European neighbours.

Keywords: Capital expenditure, Corporate governance, Europe, Shareholder value

JEL Classification: G11, G31, P51, R30

Suggested Citation

Bauer, Rob and Braun, Robin and Clark, Gordon L., The Emerging Market for European Corporate Governance: The Relationship between Governance and Capital Expenditures, 1997-2005 (November 9, 2007). Available at SSRN: https://ssrn.com/abstract=1030771 or http://dx.doi.org/10.2139/ssrn.1030771

Rob Bauer

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 3883871 (Phone)

Robin Braun (Contact Author)

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 (0) 43 388 3687 (Phone)
+31 (0) 43 388 4875 (Fax)

HOME PAGE: http://www.fdewb.unimaas.nl/finance/faculty/braun

Gordon L. Clark

Oxford University - Smith School of Enterprise and the Environment ( email )

South Parks Road
Oxford, OX1 3QY
United Kingdom
+44 1865 285197 (Phone)
+44 1865 285073 (Fax)

HOME PAGE: http://www.geog.ox.ac.uk/staff/glclark.html

Register to save articles to
your library

Register

Paper statistics

Downloads
308
Abstract Views
1,634
rank
97,988
PlumX Metrics