Anastasiya Shamshur (CERGE-EI): Corporate efficiency in Europe
We analyze corporate efficiency in European Union (EU) firms. Our exceptionally sizable dataset covers more than 4 million firm/years from multiple EU countries operating in both manufacturing and service sectors during the period from 2001 to 2011. As a methodology we employ a stochastic production frontier model. We provide evidence that firm and market characteristics, and ownership structures do matter with respect to efficiency. We show that larger firms are less efficient, greater leverage contributes to firm efficiency, and that a moderate competition environment is beneficial for old EU firms, while low completion works better for the new EU firms. Majority ownership improves firms’ efficiency in new EU firms more than in the old EU ones. Due to some lack of statistical significance we find limited evidence for a positive disciplinary effect on firm efficiency when a majority owner must account for the presence of a minority shareholder. Minority owners usually form a friendly coalition to improve firm efficiency. The contributing effect of the foreign owners is limited to the majority ownership category and is more pronounced in the new EU countries. The extent of the inter-temporal effect varies with ownership category, but exhibits reduction in efficiency following the 2008 crisis.
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