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Sunk Costs, Managerial Incentives and Firm Productivity — Empirical Evidence for German Corporations

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Groß-Schuler, A., Weigand, J. Sunk Costs, Managerial Incentives and Firm Productivity — Empirical Evidence for German Corporations. Vierteljahrshefte zur Wirtschaftsforschung, 70(2), 275-287. https://doi.org/10.3790/vjh.70.2.275
Groß-Schuler, Alexandra and Weigand, Jürgen "Sunk Costs, Managerial Incentives and Firm Productivity — Empirical Evidence for German Corporations" Vierteljahrshefte zur Wirtschaftsforschung 70.2, , 275-287. https://doi.org/10.3790/vjh.70.2.275
Groß-Schuler, Alexandra/Weigand, Jürgen: Sunk Costs, Managerial Incentives and Firm Productivity — Empirical Evidence for German Corporations, in: Vierteljahrshefte zur Wirtschaftsforschung, vol. 70, iss. 2, 275-287, [online] https://doi.org/10.3790/vjh.70.2.275

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Sunk Costs, Managerial Incentives and Firm Productivity — Empirical Evidence for German Corporations

Groß-Schuler, Alexandra | Weigand, Jürgen

Vierteljahrshefte zur Wirtschaftsforschung, Vol. 70 (2001), Iss. 2 : pp. 275–287

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1University of Erlangen-Nürnberg, Lange Gasse 20, 90403 Nürnberg, Germany.

2Otto Beisheim Graduate School of Management (WHU Koblenz), Department of Economics (Microeconomics and Industrial Organization), Burgplatz 2, 56179 Vallendar and Advisor, CPB The Netherlands Bureau for Economic Policy Analysis, Van Stolkweg14, P.O. BOX 8

Abstract

In this paper, we use a production function approach to examine the impact of ownership concentration, product market competition and financial pressure on German firm productivity. Additionally, we are interested in the influence of ownership identity and changes in ownership structure. We also test whether the specificity of assets affects productivity performance. Based on a panel of 361 German manufacturing companies for the time period of 1991–1996 we find that supplier concentration has a positive influence on firm productivity. There is also some evidence for a discipline-of-debt effect. Interestingly, the presence of several strong shareholders affects productivity negatively. In high sunk costs industries an owner change is negatively correlated with firm productivity whereas in low sunk costs industries productivity increases after owners have changed.