Corporate efficiency in Europe

Abstract

Using a stochastic frontier model and a comprehensive dataset, we study factors that affect corporate efficiency in Europe. We find that (i) larger firms are less efficient than smaller firms, (ii) greater leverage contributes to corporate efficiency, and (iii) high competition is less conductive to efficiency than moderate or low competition. In terms of ownership, we find that (iv) efficiency increases when a majority owner must deal with minority shareholders and that (v) domestic majority owners improve efficiency more than foreign majority owners when no minority shareholders are present, but (vi) the opposite is true when minority shareholders hold a substantial fraction of the firm's equity. In the analysis, we distinguish between a pre-crisis period (2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008) and a post-crisis period (2009)(2010)(2011), and find that our results are sensitive to the period of observation.

Horizontal Crowding-Out Versus Vertical Synergies Under the Mne Presence

“…standard and circumvents the issue of dispersed ownership that was shown to play no role with respect to firms' efficiency specifically in the European context (Hanousek et al, 2015) The construction of all key variables that characterize potential effects of the FDI in the upstream and downstream sectors used in our regressions is explained in the Appendix Tables A1 and A2, respectively. Both tables also contain precise information on the sources and units used.…”

Factors Determining Profi tability of Small and Medium Enterprises in Selected Industry of Mechanical Engineering in the Slovak Republic – the Empirical Study

“…It is able to identify critical aspects endangering fi rm´s future and, on the other hand, it also may reveal strengths which can, when maintained and boosted, help a company become more sustainable and competitive (Hiadlovský et al, 2016). Hereby, to take right decisions, managers need to analyse their fi nancial situation, especially in respect to fi rm´s profi tability and the factors infl uencing it (Emery et al, 2007;Atrill, 2006;Hanousek et al, 2015;Zalai et al, 2016;Park & Youngtae, 2017;Beyer & Hinke, 2018). As profi t maximisation is generally one of the most signifi cant fi nancial objectives, managers try to take decisions supporting its achievement.…”

“…Measurement of profi tability is most frequently based on the construction of profi tability indicators, which take the form of ratios. One can say that the profi tability ratios show effi ciency of the overall business activity (Higgins, 2003;Gibson, 2012;Cumming & Groh, 2018). With the help of them, the intensity of the use, reproduction and recovery of capital invested in the fi rm are expressed (Maynard, 2013).…”

“…After calculating various profi tability ratios, it is crucial to evaluate their values properly and indicate the main factors determining them (Gibson, 2012;Higgins, 2003;Maynard, 2013;Zalai et al, 2016). For the companies, the most proper option would be to compare the ratios with those for previous few years and with the mean values of the industry´s ratios (Revsine et al, 2015;Pavelková, 2010).…”

Ownership Concentration and Firm Performance in European Emerging Economies: A Meta-Analysis

“…Hanousek et al (2015) examined corporate efficiency in old and new Europe and concluded that majority ownership does not ensure efficiency.4 The question of how differences in the types of owners and privatization methods employed can affect firm performance in transition economies has been examined byIwasaki and Mizobata (2018) by using a meta-analysis approach similar to the one described herein. 5 A meta-analysis conducted byHeugens et al (2009), on the other hand, included only studies focusing on companies in Asia.6 These emerging markets include 14 counties in South America, Asia, the Middle East, and Africa and the four CEE/FSU countries (i.e., the Czech Republic, Hungary, Poland, and Russia).…”