Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School...
-
date post
21-Dec-2015 -
Category
Documents
-
view
213 -
download
0
Transcript of Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School...
![Page 1: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/1.jpg)
Competition for Corporate Charters: Transatlantic
DifferencesColin Mayer
Saïd Business School
University of Oxford
![Page 2: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/2.jpg)
The Issues
• Run to the top or bottom
• Impediments to competition
• Externalities
• Effective competition
• Outcomes – place of incorporation
• Share price reactions
![Page 3: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/3.jpg)
Percentage of Listed Companies Under Majority Control
68 65.7 64.2
56.1
39.432.6
26.3
2.4 2 1.70
10
20
30
40
50
60
70 Austria
Belgium
Germany
Italy
NL
Spain
Sweden
UK
Nasdaq
NYSE
Source : country chapters in Barca and Becht (2001)
![Page 4: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/4.jpg)
Percentage of Voting Blocks Associated With Different Types of Investors in
Germany
0%
5%
10%
15%
20%
25%
30%
35%
Individuals and Families
Trusts & HoldingCompanies
Companies
Financial Institutions
Government
![Page 5: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/5.jpg)
Porsche AGVoting Stock
Porsche AGNon-Voting
Porsche/PiechFamily Voting Pool
100% 10%*
Source : Hoppenstedt Guide 1999; * estimate
50:50 capital
Porsche AG
![Page 6: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/6.jpg)
ING
Source : Form 20-F
100% capital 100% votes
ING Administratie Kantoor
Certificate Holders
100% capital 0% votes
ING Groep N.V.
![Page 7: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/7.jpg)
Diversity of Financial Systems
• Banks versus markets
• Concentrated versus dispersed ownership
• Stakeholder versus shareholder
• Common versus civil law
• Single party versus coalition governments
![Page 8: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/8.jpg)
Differences Particularly Pronounced in Europe
• Significance of banks and stock markets
• Size of blockholdings
• Nature of blockholdings
• Anti-takeover devices
• Legal and political systems
![Page 9: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/9.jpg)
Causes: Investor Protection
• Financial development required for external financing
• External financing promotes growth
• Investor protection necessary condition for financial development
• Therefore, investor protection necessary condition for growth
![Page 10: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/10.jpg)
Evidence from UK
• There was financial development without investor protection
• There was external financing without investor protection
• There wasn’t any more with it• Therefore investor protection was neither a
necessary nor sufficient condition for growth
![Page 11: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/11.jpg)
First Caveat on Policy
Simple rules don’t work
![Page 12: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/12.jpg)
Consequences: Agency Versus Investor Abuse
• Agency problem in dispersed systems
• Minority investor abuse in concentrated ownership system
![Page 13: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/13.jpg)
Evidence on Performance in Europe
• Bank control limited
• Concentrated owners do not exercise control
• Independent directors do not intervene
• Takeovers do not discipline bad management
=>Most conventional wisdom is not accurate
![Page 14: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/14.jpg)
Second Caveat on Harmonization
We don’t know much
![Page 15: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/15.jpg)
Systems View
• Theory:
Different forms of information
Different types of control
Different degrees of commitment
• Evidence
Association of different systems with different economic activities
![Page 16: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/16.jpg)
Example 1
• External equity financed and skill dependent industries grow particularly rapidly in countries with good information disclosure
• Particularly closely associated with R&D not fixed investment
• Relations dependent on stage of economic growth
![Page 17: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/17.jpg)
Example 2
• VC firms are primarily financed by banks in Germany and Japan
• Bank financed VC firms invest in later stage activities than individual and corporate funded VC firms
![Page 18: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/18.jpg)
Example 3Patent Specialization: USA and Germany
-0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80
Agric.,Food P roc. Mach.
Civil Engineering
Transport
Machine Tools
Consumer Goods
Thermal P rocesses
Mechanical Elements
Environment Tech.
Handling Machinery
Audiovisual Tech.
Mater. P roc., Textiles
Electrical Machinery
Mater., Metallurgy
Engines, Pumps, Turbs.
Space Tech., Weapons
Control Systems
Organic Chemistry
Chemical Engineering
Basic Materials Chem.
Optics
Surf. Tech., Coating
Telecommunications
Macro.Chem.,Polymers
Agric., Food Chem.
Semiconductors
Nuclear Engineering
Biotechology
Pharmaceuticals
Information Tech.
Medical Technology
Germany USA
![Page 19: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/19.jpg)
Third Caveat on Harmonization
There isn’t a best system
Different systems serve different purposes
![Page 20: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/20.jpg)
Effect of Harmonization
• Presumes best practice
• Standardizes on presumed best practice
• Limits variation
• Discourages innovation
![Page 21: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/21.jpg)
What is Required?
• Diversity
• Experimentation
• Innovation
![Page 22: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/22.jpg)
How Should It Be Achieved?
• Choice not harmonization
• Enabling not prescriptive regulation
• Freedom to choose
• Strong disclosure
• Harmonization where there are cross-border externalities, as in banking
![Page 23: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/23.jpg)
Arguments Against Freedom to Choose
• European playing-field is too unlevel
• Distorted by pursuit of private benefits
• Need to establish pre-conditions for competition
• Competition inimical to systems based on long-term relations
• Best system will not emerge through mobility
![Page 24: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/24.jpg)
Perfect Competition and Product Differentiation
• Not seeking system that maximizes shareholder value
• Difference is that US is competition within a system
• Europe is selection between systems• Providing best environment (financial system,
labour markets, legal and political system) for diverse corporate activities
• Competition and survival of fittest in product markets not corporate form
![Page 25: Competition for Corporate Charters: Transatlantic Differences Colin Mayer Saïd Business School University of Oxford.](https://reader036.fdocuments.us/reader036/viewer/2022062714/56649d555503460f94a32207/html5/thumbnails/25.jpg)
Justification for Freedom of Mobility
• Allows matching of corporate activities with different systems
• Exploits not destroys diversity of European systems
• Through strong disclosure enhances not detracts from financial integration