What makes firms perform well?

Nickell, Stephen; Nicolitsas, Daphne; Dryden, Neil

doi:10.1016/s0014-2921(97)00037-8

Cited by 454 publications

(318 citation statements)

References 23 publications

(1 reference statement)

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“…The results of Zingales (1998) support these findings. All these empirical studies use data from the U.S. Nickell et al (1997) estimate the effect of product market competition, shareholder control, and debt levels on firm-level productivity growth in the U.K., including interaction terms.…”

Section: Existing Literature On the Determinants Of Firm Productivitymentioning

confidence: 99%

“…As many studies (e.g., Prowse, 1994, Edwards andFischer, 1994) argue that control is much tighter in marketbased than in bank-based economies, it will be interesting to compare the findings Nickell et al (1997) obtained for the U.K. -a market-based economy -with our empirical findings for Germany, an economy with a bank-based system of corporate governance and a complex ownership structure characterized by cross-holdings and poor external control structures (see, among others, Köke, 1999, for descriptive evidence on ownership structures in German manufacturing).…”

Section: Existing Literature On the Determinants Of Firm Productivitymentioning

confidence: 99%

“…1 Given the importance of the issues and the inconclusive predictions from theoretical models, surprisingly little empirical work has been done so far to investigate the interaction of corporate governance and product market competition in their effect on productivity at the firm level. Nickell et al (1997) are the first to analyze this question directly using a panel of U.K. firms. To our knowledge, there is no similar formal firm-level study of productivity growth for bank-based continental European economies, in particular for Germany, where corporate governance problems are judged to be more severe than in market-based economies such as the U.K. or the U.S. (see, e.g., Edwards and Fischer, 1994).…”

Section: Introductionmentioning

confidence: 99%

“…In this paper, we follow the approach of Nickell et al (1997) and analyze the role of product market competition and corporate governance as determinants of productivity growth in German manufacturing firms. We restrict our attention to the manufacturing sector because productivity dynamics in service industries are much more difficult to measure and to estimate in empirical models.…”

Section: Introductionmentioning

confidence: 99%

“…In addition to standard measures of productivity derived from the companies' balance sheets, our data set also contains information on the degree of competition in the firm's product market, measured at the four-digit industry level, and on ownership structure. 2 In contrast to much of the existing empirical literature on corporate governance (excluding the work by Nickell et al, 1997), our econometric approach allows to control for the endogeneity of both product market competition and corporate governance. 3 We estimate productivity growth equations (derived from a constant returns Cobb-Douglas production function) using a fixed-effects generalized method of moments estimator introduced by Arellano and Bond (1991).…”

Section: Introductionmentioning

confidence: 99%

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Product market competition, corporate governance and firm performance: an empirical analysis for Germany

Januszewski

Köke

Winter

2002

Research in Economics

144

105

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Productivity growth has been slow in many continental European countries over the last few decades, especially in comparison with the United States. It has been argued that lack of product market competition and poor corporate governance are two of the main reasons for this phenomenon. However, predictions from theoretical models are far from unambiguous, and empirical evidence is sparse, in particular at the level of individual firms. In this paper, we aim to close this gap with an econometric analysis of firm performance in Germany. Based on a unique panel data set with detailed information on almost 400 manufacturing firms over the 1986-94 period, we find that firms operating in industries which are characterized by more intensive product market competition experience higher rates of productivity growth. We also find weak evidence for the notion that in Germany's bank-based system of internal control, ownership concentration is harmful for productivity growth. Keywords Non-technical summaryProductivity growth has been slow in many continental European countries over the last few decades, especially in comparison with the United States. European countries such as Germany and France have low capital performance as measured by capital productivity and various rates of return. Improving productivity is important not only for shareholder value, but also from a public policy perspective: In many countries, social security systems move away from pay-as-you-go systems to more capital-funded systems, and therefore the rate of return on capital will be even more important as a determinant of future generations' welfare than in the past.It has been argued that lack of product market competition and poor corporate governance are the two main reasons for slow productivity growth in continental Europe. However, predictions from theoretical models are far from unambiguous, and empirical evidence is sparse, in particular at the level of individual firms. This study tries to close this gap with an econometric analysis of firm performance in Germany. Using a panel of almost 400 German manufacturing firms that covers the period 1986-94, we analyze how product market competition and corporate governance affect the growth of total factor productivity.Our empirical approach improves on existing empirical studies on corporate governance in Germany in two important respects. First, the data set consists of listed and non-listed firms which also differ in their legal forms. Hence, our analysis is not restricted to public companies with limited liability whose shares are listed (börsennotierte Aktiengesellschaften). Second, we recognize that product market competition and corporate governance are potentially endogenous. To avoid biased regression results, we use an instrumental variables technique.We find that firms which operate in more competitive product markets have a higher growth of total factor productivity. This suggests that an increase in the intensity of competition should result in productivity improvements. Fro...

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Section: Existing Literature On the Determinants Of Firm Productivitymentioning

confidence: 99%

Section: Existing Literature On the Determinants Of Firm Productivitymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Product market competition, corporate governance and firm performance: an empirical analysis for Germany

Januszewski

Köke

Winter

2002

Research in Economics

144

105

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Ownership structure and economic performance in the largest european companies

2000

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The paper examines the impact of ownership structure on company economic performance in the largest companies from 12 European nations. Ownership structure is measured by the identity and share of the largest owner. Performance is measured by return on assets, market to book values and sales growth controlling for industry, capital structure and nation effects. We find evidence of a bell-shaped (first increasing and then decreasing) effect of ownership share on assets returns and market-to-book values of equity. Companies whose largest owner is a financial institution have higher market-to book values than companies in which the largest owner is a family, another company or the government. The effects on asset returns are qualitatively identical, but weaker and insignificant except for a negative effect of government ownership. In contrast, companies whose largest owner is a family or another company have significantly higher sales growth. Nationality is found to influence the relationship between ownership structure and market-to-book values. For example the positive marginal effect of ownership ties to financial institutions is stronger in the market-based British system than in continental Europe.

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Short T dynamic panel data models with individual, time and interactive effects

Hayakawa

Pesaran

Smith

2023

J of Applied Econometrics

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SummaryThis paper proposes a transformed quasi‐maximum likelihood (TQML) estimator for short dynamic fixed effects panel data models allowing for interactive effects through a multifactor error structure. The proposed estimator is robust to the heterogeneity of the initial values and common unobserved effects, while at the same time allowing for standard fixed and time effects. It is applicable to both stationary and unit root cases. The order condition for identification of the number of interactive effects is established, and conditions are derived under which the parameters are locally identified. It is shown that global identification in the presence of the lagged dependent variable cannot be guaranteed. The TQML estimator is proven to be consistent and asymptotically normally distributed. A sequential multiple testing likelihood ratio procedure is also proposed for estimation of the number of factors which is shown to be consistent. Finite sample results obtained from Monte Carlo simulations show that the proposed procedure for determining the number of factors performs very well, and the TQML estimator has small bias and root mean square error (RMSE) and correct empirical size in most settings. The practical use of the TQML approach is demonstrated by means of two empirical illustrations from the literature on cross county crime rates and cross country growth regressions.

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What makes firms perform well?

Cited by 454 publications

References 23 publications

Product market competition, corporate governance and firm performance: an empirical analysis for Germany

Product market competition, corporate governance and firm performance: an empirical analysis for Germany

Ownership structure and economic performance in the largest european companies

Short T dynamic panel data models with individual, time and interactive effects

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