Outside board memberships of CEOs: Expertise or entrenchment?

We investigate whether outside board memberships of CEOs signal expertise or entrenchment. The analysis is based on panel data of the largest German companies covering the period from 1996 to 2008. Supporting the entrenchment hypothesis, our analysis reveals that firms having a CEO with one or more outside mandates suffer from significantly weaker firm performance compared with firms having a CEO without any outside board mandates. Moreover, disciplinary CEO turnovers become less likely and turnover-performance sensitivity declines with rising board memberships of the top manager. We conclude that outside mandates enhance managerial power at the expense of the home firm's shareholders. --Corporate Governance,Entrenchment,Outside Board Memberships,CEO turnover

How important is industry-specific managerial experience for innovative firm performance?

This study examines how industry-specific managerial experience affects firms’ innovation performance in the context of different institutional environments. Based on firm-level data from 27 Central and Eastern European countries we identify a robust positive relationship between industry-specific experience of the top-manager and the decision to innovate as well as the share of new product-related sales. These effects are particularly pronounced for small firms operating outside the European Union or, more generally, in institutionally less developed countries. The results suggest that managerial experience affects firm innovations largely indirectly, for example, by reducing uncertainty about future returns on innovations or by providing knowledge about how to cope with institutional shortfalls potentially hampering the commercial success of new products

Ownership concentration, institutional development and firm performance in Central and Eastern Europe

This paper analyzes the relationship of ownership concentration and firm performance in the context of different institutional environments in 28 Central and Eastern European transition economies. Using the BEEPS data for the period from 2002 to 2009 we find an inverted u-shaped relation of ownership concentration and firm performance for those firms that operate in non-EU-member countries as well as those firms that are situated in less developed legal systems according to Freedom House ratings. We interpret these findings as evidence for a classic agency problem in the lower part of the ownership concentration distribution that is dominated by a ‘private benefits of control’ problem with rising ownership concentration

Personelle Unternehmensverflechtung und Vorstandsgehälter

Personal linkage between the biggest German corporations is subject to a special survey by the monopoly-commission every two years. For the latest reporting year 2004 linkage-data is used to examine the impact of personal linkage on the compensation of management board members. The assumed positive coherence approves in two ways. First, compensation of management board members rises with the amount of corporation-linkages by additional supervisory board mandates of the individual members of the management board. Second, the degree of personal supervisory board linkage by multi-mandates has a positive impact on the remuneration of the management board members. Estimation results turn out to be very robust compared to model-variations on the one hand and influence of different control variables on the other hand. --Corporate Governance,Managerentlohnung,Unternehmensverflechtung

Managerverschanzung durch spezifische Investitionen

By means of a simple economic model, Shleifer and Vishny (1989) describe how top managers can entrench themselves by specific overinvestment. An extension of the model with additional investments exposes interdependencies that exceed the primary value of explanation. The extension of the model focuses on investment behaviour and the impact of the market for corporate control on managerial entrenchment. Despite specific over-investment, total corporate investment does not change. Increased specific investments are balanced by appropriate disinvestments in other areas of the company. Additionally, more competition does not necessarily discipline the manager. In fact, a competitor can increase the divergence between managers and shareholders. An increase in managerial competence on the part of the competitor can even induce a loss of wealth for all actors. --

Bestimmungsfaktoren des Erwerbs der allgemeinen Hochschulreife in Deutschland

Für Deutschland als ressourcenarmes Hochlohnland ist die Bildung von Humankapital ein bedeutender Faktor für das Wirtschaftswachstum. Im Vergleich zu anderen entwickelten Volkswirtschaften ist der Anteil der Bevölkerung mit einem tertiären Bildungsabschluss relativ gering. Durch die zunehmende Globalisierung und aufgrund des faktorverzerrenden technologischen Wandels zu Gunsten von hochqualifizierten Arbeitskräften ist die relative Nachfrage nach gut ausgebildeten Arbeitskräften gestiegen. Die Integration von gering qualifizierten Arbeitskräften wird in Deutschand zunehmend schwieriger. Vor diesem Hintergrund ist eine gute schulische Ausbildung zukünftiger Generationen entscheidend für die Entwicklung Deutschlands. Wir untersuchen mit einem Random-Effects Panel Probit Modell die Determinanten, erfolgreich die allgemeine Hochschulreife zu erlangen. Als Basisdatensatz wird hierzu der Jugenddatensatz des SOEP der Jahre 2000 bis 2007 herangezogen, den wir mit dem Hauptdatensatz und weiteren Biographiedatensätzen des SOEP zusammenfügen. Als Determinanten dienen umfangreiche Informationen über die Charakteristika der Jugendlichen, der Eltern und der Großeltern. Wir finden deutliche Unterschiede zwischen Mädchen und Jungen. Insbesondere haben Eltern und Großeltern einen größeren Einfluss auf die Mädchen im Vergleich zu den Jungen. -- Investment in human capital is a crucial factor of economic growth for Germany as a highly developed high income country. Compared to other industrialized countries the proportion of the population with a tertiary educational attaimnent is low. Due to skill biased technical change and Globalization relative demand for highly qualified workers rises. Thus the integration of low qualified workers becomes more and more difficult. A high formal educational attainment of future generations is important for sustained economic growth in Germany. Using a Random-Effects Panel Probit Model we analyze determinants of successful high school graduation in Germany. As our main data set we use the SOEP youth biography data for the period ranging from 2000 until 2007. In our empirical model we include rich information of characteristics of the adolescents, their parents and grandparents. We find markedly different results for males and females. Especially the influence of parents and grandparents on female adolescents is higher relative to male adolescents.Abitur,Random-Effects Panel Probit Modell,Deutschland,High School,Random-Effects Panel Probit Model,Germany

Is This Time Different? How Digitalization Influences Job Creation and Destruction

With the process of digitalization now in full swing, many are wondering how the adoption of new technologies influences job creation and destruction. Much hinges upon the specific tasks that machines take on and how many new tasks are created through the adoption of new digital technologies. Some argue that most tasks that are at risk of automation are those performed by rather low- to medium-skilled employees, while most new tasks that emerge from the adoption of digital technologies complement high-skilled labor. We present evidence derived from representative survey data from Switzerland that is consistent with this view. Specifically, we find that increased investment in digitalization is associated with increased employment of high-skilled workers and reduced employment of low-skilled workers, with a slightly positive net effect. The main effects are almost entirely driven by firms that employ machine-based digital technologies, e.g. robots, 3D printing or the Internet of Things. We do not find any significant employment effects when non-machine-based digital technologies are considered, e.g. ERP, e-commerce or cooperation support systems

Corporate governance and employee power in the boardroom: An applied game theoretical analysis

The discussion about employee representation on supervisory boards has received much attention from scholars and politicians around the world. We provide new insights to this ongoing debate by employing power indices from game theory to examine the real power of employees on boards and its effect on firm performance. Based on unique panel data of the largest listed companies in Germany, we find an inversely U-shaped relationship between labour power and Tobin's Q with a value-maximising labour power of approximately 43 %. Our results are robust to different game theoretical calculations of labour power, as well as various econometric models.Die Diskussion über Arbeitnehmermitbestimmung in Aufsichtsräten hat erhebliche Aufmerksamkeit von Wissenschaftlern und Politiker in vielen Ländern erfahren. Wir tragen neue Einsichten zu dieser fortdauernden Debatte bei, indem wir spieltheoretische Machtindices verwenden, um die Macht von Beschäftigten und deren Beitrag zum Unternehmenserfolg zu bestimmen. Mit originären Paneldaten der größten deutschen gelisteten Unternehmen finden wir eine umgekehrt U-förmige Beziehung zwischen Arbeitnehmermacht und Tobin's Q, wobei die wertmaximierende Arbeitnehmermacht bei rund 43 % liegt. Unsere Ergebnisse sind robust sowohl hinsichtlich unterschiedlicher spieltheoretischer Berechnungen der Arbeitnehmermacht als auch verschiedener ökonometrischer Modellierungen.

Director interlocks and executive turnover in German public corporations: A hazard analysis for the period from 1996 to 2008

Wir untersuchen das Ausscheiden von Vorstandsmitgliedern, insbesondere hinsichtlich verschiedener Arten von weiteren Vorstands- und Aufsichtsratsmandaten der Aufsichtsratsmitglieder. Es werden alle Vorstandsmitglieder der größten deutschen Aktiengesellschaften im Zeitraum 1996 bis 2008 analysiert. Schätzungen von proportionalen Hazard-Raten gemäß Cox legen nahe, dass Aktiengesellschaften ihre eigenen Vorstandsmitglieder in fremde Aufsichtsräte schicken, um ihre Kapitalanteile aktiv zu managen und zu überwachen. Externe Vorstandsmitglieder im Aufsichtsrat, die keine Kapitalanteile repräsentieren, erhöhen nur die Aufsicht über Vorstandsvorsitzende. Die Zahl weiterer externer Aufsichtsratsmandate aller Vertreter der Kapitalseite scheint die Corporate Governance zu verbessern, was auf einen funktionierenden Markt für knappe Talente als Aufsichtsrat hindeutet.We investigate executive turnovers with focus on different kinds of outside board memberships of supervisory board members. The analysis is based on all management board members of the largest German corporations during the period from 1996 to 2008. Cox proportional hazard estimations suggest that companies send their executives to supervisory boards of other firms to actively monitor their capital stakes. External executives that do not represent capital stakes enhance only the monitoring intensity of the CEO. The total number of external supervisory board mandates of all shareholder representatives seems to enhance corporate governance pointing to a functioning market for scarce top-monitoring-directors.

Mandatory financial information disclosure and credit ratings

When firms are forced to publicly disclose financial information, credit rating agencies are supposed to improve their risk assessments. Theory predicts such an information quality effect but also an adverse reputational concerns effect because credit analysts may become increasingly concerned about alleged rating failures. We empirically examine these predictions using a large scale quasi-natural experiment in Germany, where firms were required to publicly disclose annual financial statements. Consistent with the reputational concern hypothesis, we find an average increase in credit rating downgrades that is entirely driven by changes in the discretionary assessment of the credit analysts rather than changes in firm fundamentals. Analysts tend to give positive private information a lower weight in their risk assessment, while they put a higher weight on negative public information. A last set of results indicate that professional credit providers understand that the resulting downgrades are not warranted, while unsophisticated lenders did indeed reduce the provision of trade credit in response to the rating downgrades