Legal Origin and Size Effects in European Listed Firms

Per-Olof Bjuggren () and Andreas Högberg

ERSA conference papers from European Regional Science Association

Abstract: This paper investigates the impact of legal tradition and firm size on investment performance for firms in 16 European countries. Europe as a region is of special interest in this sense since the legal systems differs widely within a concentrated geographical area. Anglo Saxon, German, French as well as Scandinavian variants of legal systems can be found in representative forms in Europe. Previous studies suggest that minority shareholders enjoy a higher degree of property rights in common law (Anglo Saxon) countries compared to civil law (French, German and Scandinavian) countries. Expropriation of minority shareholders may be observed as excessively large organizations and non transparent hierarchies of the management in the firm. This study differs from earlier studies by concentrating on the firm size and its effects on investment performance by connecting it to the legal origin in each of the 16 European countries included in the study. We find a negative relation between firm size and performance as expected for civil law countries and no effect for common law countries. However, for individual countries, the effects of firm size and legal origin on investment performance is ambiguous

Date: 2011-09
New Economics Papers: this item is included in nep-bec and nep-eec
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