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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

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  1. Definitions
  2. The 'telecommunication companies swordfight' case study
  3. The 'oil companies swordfight' case study

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.

[...] Firstly, studying the evolution of the financing structures of the main companies in two key-sectors in both France and The Netherlands has made me realise that, under special conditions (financial distress and favourable economic conditions), there are many different ways of playing with the capital structure in order to either finance new projects or restructure a company. However, I have noted lots of similarities in the approaches of the oil companies, unlike the telecommunications firms. This must be due to the fact that the oil market itself is truly global, and again unlike the telecommunications market which needs local infrastructure and branding. [...]


[...] Had markets and tax structures been perfect, the weighted average cost of capital wouldn't be correlated from the financing structure of a given company (hence the statement that there doesn't exist any optimal financing structure). But markets are not perfect tools, that's what makes them charming and this research paper's topic worth considering. The only figure that wasn't derived from the financial statements in this paper, alongside the risk-premium and T-bills rate, being the equity Beta of a company, here is a way to find the weighted average cost of capital from the Beta of a company: First of all, calculate the unlevered or unleveraged Beta of the company: Equity Beta / [(1-corporate tax rate)(Debt/Equity ratio)]); Then and finally, this is the way one may obtain your weighted average cost of capital: risk-free rate + unlevered Beta * market risk premium. [...]


[...] Winner: Total Differences in terms of capital and financing structures, and cultural conclusion What can be drawn from this swordfight is that, although both companies have very strong fundamentals, consistent strategies and benefit from a rather nervous oil market, Royal Dutch Shell and Total's stocks do not behave in the same way. Whilst many brokers' consensus from bulge bracket companies strike bullish conclusions about the ability of Total's management to create value for its shareholders, Shell has been for about a year constantly undergoing a corporate governance and accountability crisis over both its shareholders' structure (by far too complicated for the average investor, this being due to political reasons between The Netherlands and the United Kingdom) and its oil reserves, twice misestimated and overvalued. [...]

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