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The effects of convergence: Internationalisation and the changing distribution of net value added in large German firms

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  • Hassel, Anke
  • Beyer, Jürgen

Abstract

The paper examines whether and how the increasing internationalisation of firms impacts on the operation of a co-ordinated market economy. Following the tenets of agency theory it assumes that an emerging market for corporate control changes the monitoring mechanisms that oversee management. Since Anglo-American forms of monitoring are usually associated with a higher return for investors compared with Continental European firms, a change in the distribution of the net value added of firms is expected. Using financial data on 59 large German companies, the paper shows that the emerging convergence of German corporate governance practices to Anglo-American standards has had a weak, but significant, impact on the distribution of net value added. This is in contrast to the impact of the internationalisation of firms on product markets, which does not have an effect. Since the market for corporate control is, however, still underdeveloped in Germany, the main effects remain to be seen.

Suggested Citation

  • Hassel, Anke & Beyer, Jürgen, 2001. "The effects of convergence: Internationalisation and the changing distribution of net value added in large German firms," MPIfG Discussion Paper 01/7, Max Planck Institute for the Study of Societies.
    • Handle: RePEc:zbw:mpifgd:017
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    References listed on IDEAS

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    1. Hassel, Anke & Höpner, Martin & Kurdelbusch, Antje & Rehder, Britta & Zugehör, Rainer, 2000. "Dimensionen der Internationalisierung: Ergebnisse der Unternehmensdatenbank Internationalisierung der 100 größten Unternehmen in Deutschland," MPIfG Working Paper 00/1, Max Planck Institute for the Study of Societies.
    2. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    3. Rafael La Porta & Florencio Lopez‐de‐Silanes & Andrei Shleifer & Robert W. Vishny, 2000. "Agency Problems and Dividend Policies around the World," Journal of Finance, American Finance Association, vol. 55(1), pages 1-33, February.
    4. Andrew P. Dickerson & Heather D. Gibson & Euclid Tsakalotos, 1998. "Takeover Risk and Dividend Strategy: A Study of UK Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 46(3), pages 281-300, September.
    5. Hassel, Anke & Rehder, Britta, 2001. "Institutional change in the German wage bargaining system: The role of big companies," MPIfG Working Paper 01/9, Max Planck Institute for the Study of Societies.
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