A Dutch-French comparative corporate cultures survey through the study of the financing structures of two key-sectors multinational companies: KPN v. France Telecom; Royal Dutch Shell v. Total

Résumé du document

The main cultural assumption in this research paper is about, the French corporate culture once being Latin-like and the Dutch one having been German-like, both the corporate culture of France and the Netherlands firms are converging towards the Anglo-Saxon model. In order to confirm or not the preceding hypothesis, we choose in this research paper, to follow a two-fold case study approach, resulting in a thorough 2000-2003 dynamic examination of the financing and capital structures of leading competing firms in two key-sectors; that is to say telecommunications companies and oil companies. The three case studies chosen, basically raise three key issues when it comes to corporate culture: restructuring in a deregulating environment as far as the telecommunications companies are concerned; corporate governance and stock performance in a bullish barrel market for the oil companies.

Extraits

[...] Although the former argument doesn't reflect in this swordfight, the latter doesn't need checking. However, the former argument understood from a geographic viewpoint would be relevant and lead us to our second point. France Telecom' s debt ratios between structurally lower than those of KPN, the explanation could be that, through its activities in Argentina, Poland, Germany, not to mention several other countries, France Telecom is despite its name more international than a KPN focused on the Benelux and Germany. [...]

[...] This being perceived by the market, the stock fell down and the management was discredited (mid-2004). Furthermore, its initial plans to re-engineer its capital structure by purchasing back its shares on the market has been jeopardized by the evidence of wrong forecasts and inaccurate project valuation tools (e.g. a barrel for 20 USD; mid-2004) a “mistake” made twice Shell and Total have lots in common. Both of them belong to the world's biggest companies in terms of market capitalisations, both of them are the result of huge trans-national intra-European mergers (respectively the UK - the Netherlands and France Belgium). [...]

[...] If all academics and researchers believe that corporate governance is a field in which most is still to be discovered, there is one very thing that cannot be whatsoever be denied: whatever the firm, market valuation is strongly associated with corporate governance characteristics (e.g., executive and director stock-based incentives, institutional and blockholder stock ownership, board structure, shareholders' structure) (Sanders & Boivie, 2003). One last thing: academics would for sure find this very swordfight relevant when it comes to capital and financing structures; indeed, the four categories of capital structure determinants all apply to the Royal Dutch Shell vs. Total comparison (Harris & Raviv, 1991). [...]

[...] Nota Bene: on October the market risk-premium amounted to 4,37 (source: JCFGroup, quoted in La Vie Financière, September 24th 2004, N°3094 S). Nota Bene: the corporate tax rate is 40% in both the Netherlands and France. II) THE “TELECOMMUNICATION COMPANIES SWORDFIGHT” CASE STUDY Introduction KPN vs. France Telecom Financial restructuring in a distressed environment KPN and France Telecom have a lot in common, among which a consequent stake of it belonging to their respective beloved - national states and huge market utility and retail shares in their respective markets. [...]

[...] Winner: KPN Differences in terms of capital and financing structures, and cultural conclusion One of the points that struck us while writing this paper and going over the annual reports of KPN and France Telecom is the extraordinary similarities between KPN and France Telecom' s debt reduction programmes: both divest from non-core business activities, both intend to conquer strategic new markets, etc. Furthermore, both companies make use of the same financial securities panel of tools for restructuring companies (convertible bonds, capital increases, etc.) in order to make their balance sheets (and within it, their liabilities part most of all) look nicer. [...]