DP10500 Corporate Efficiency in Europe

Author(s): Jan Hanousek, Evzen Kocenda, Anastasiya Shamshur
Publication Date: March 2015
Keyword(s): efficiency, Europe, firms, ownership structure, panel data, stochastic frontier
JEL(s): C33, D24, G32, L60, L80, M21
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10500

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?2008) and a post-crisis period (2009-2011), and find that our results are sensitive to the period of observation.