Do Foreign Owners Favor Short-Term Profit? Evidence from Germany

Verena Dill (), Uwe Jirjahn and Stephen Smith

No 8165, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Comparing domestic- and foreign-owned firms in Germany, this paper finds that foreign-owned firms are more likely to focus on short-term profit. This influence is particularly strong if the local managers of the German subsidiary are not sent from the foreign parent company. Moreover, the physical distance between the foreign parent company and its German subsidiary increases the probability of focusing on short-term profit. These findings conform to the hypothesis that foreign owners facing an information disadvantage concerning the local conditions of their subsidiaries are more likely to favor short-term profit. However, we do not identify differences in "short-termism" between investors from "Anglo-Saxon" and other foreign countries; rather, results point in the direction of more general features of corporate globalization.

Keywords: foreign ownership; short-termism; asymmetric information; globalization; multinational enterprises; stakeholders (search for similar items in EconPapers)
JEL-codes: F23 G34 M16 P10 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2014-05
New Economics Papers: this item is included in nep-cfn, nep-eur and nep-hme
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: Cambridge Journal of Economics, 2016, 40(1), 123-140

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Related works:
Journal Article: Do foreign owners favour short-term profit? Evidence from Germany (2016)
Working Paper: Do Foreign Owners Favor Short-Term Profit? Evidence from Germany (2013)
Working Paper: Do Foreign Owners Favor Short-Term Profit? Evidence from Germany (2013)
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