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

Abstract

The paper examines whether and how the increasing internationalization of rms 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 rms, a change in the distribution of the net value added of rms is expected. Using nancial data on fty-nine large German companies, the paper shows that the emerging convergence of German corporate governance practices to Anglo-American standards has had a weak, but signi cant, impact on the distribution of net value added. This is in contrast to the impact of the internationalization of rms 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.

Exploring the Impact of Legal Systems and Financial Structure on Corporate Responsibility

“…In an IB-based study of 150 corporations from the UK, Germany, and Canada, Bondy et al (2004Bondy et al ( , 2008 found evidence of some convergence of the German national business system model [i.e., the network-oriented model of ''Rhenish capitalism,'' (Albert, 1991)] toward the UK's ''Anglo-Saxon model of marketoriented shareholder capitalism.'' Similarly, Beyer and Hassel (2002), in a study examining the 100 largest companies in Germany from 1992 to 1998, revealed the emerging convergence of German corporate governance practices with Anglo-Saxon standards, guided by legal changes that encouraged the transparency and liberalization of financial markets. Nonetheless, Beyer and Hassel's study found no evidence of convergence in the relationship between management and employees.…”

What connects industrial relations and corporate governance? Explaining institutional complementarity

“…This may be a surprise, as shareholder-oriented restructuring promotes profitability by slowing down growth and therefore amounts to redistribution away from employees (Beyer and Hassel, 2002). Several mechanisms help works' councils tolerate the introduction of profitability goals and restructuring.…”

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“…These processes can be set in motion by a shift in the environment that confronts actors with new problems that they address by using existing institutions in new ways or in the service of new goals. 'As increased marketization of corporate governance undermines distributional compromises in industrial relations (Beyer and Hassel, 2002), it may be misleading to focus on the stability of institutional structures as this may hide what Gilson (2000) calls 'functional convergence' .…”

The disintegration of organised capitalism: German corporate governance in the 1990s

“…11 This increased unemployment and exacerbated the financial problems of the social security and pension system, as many companies reduced the number of employees via early retirement schemes. Especially important is the reduced willingness of companies following shareholder value principles to keep employment constant in times of economic crisis.…”