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

40 Pages Posted: 24 Mar 2003

See all articles by Jens F. Koke

Jens F. Koke

Allianz Group

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Date Written: March 2003

Abstract

This study investigates the impact of corporate governance and product market competition on total factor productivity growth in Germany and the UK. For Germany, the prototype of a bank-based governance system, productivity grows faster in firms controlled by financial institutions (in particular, banks and insurance companies) and intense competition reinforces this beneficial impact. Furthermore, the importance of the German creditors (mostly banks) for productivity growth is particularly significant in firms which experience financial difficulties or are in financial distress. For the UK, a market-based governance system, we do not find any evidence that creditors play a disciplinary role. Still, there is strong evidence that shareholder control (by insiders, private outsiders and financial institutions) leads to substantial increases in productivity in poorly performing firms. We also find evidence that product market competition is a substitute for blockholder control in the UK.

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

JEL Classification: D24, D43, G32

Suggested Citation

Koke, Jens F. and Renneboog, Luc, Do Corporate Control and Product Market Competition Lead to Stronger Productivity Growth? Evidence from Market-Oriented and Blockholderbased Governance Regimes (March 2003). ECGI - Finance Working Paper No. 14/2003. Available at SSRN: https://ssrn.com/abstract=389000 or http://dx.doi.org/10.2139/ssrn.389000

Jens F. Koke

Allianz Group ( email )

Denmark

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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