Hannes F. Wagner

The Value of Offshore Secrets – Evidence from the Panama Papers

We exploit one of the largest data leaks to date to study whether and how firms use secret offshore vehicles. From the leaked data, we identify 338 listed firms as users of secret offshore vehicles and document that these vehicles are used to finance corruption, avoid taxes, and expropriate shareholders. Overall, the leak erased

Public Equity Issues and the Scope for Market Timing

174 billion in market capitalization among implicated firms. Following the increased transparency brought about by the leak, implicated firms experience lower sales from perceptively corrupt countries and avoid less tax. We estimate conservatively that one in seven firms have offshore secrets.

Family Firms and Labor Market Regulation

This paper tests whether and how market timing explains public equity offerings and consequently firm leverage. Prior research has subsumed two mechanisms under the market timing terminology. One is a mispricing mechanism with irrational investors or managers, the other is due to fluctuations in adverse selection costs. Using a comprehensive sample of SEO and IPO firms I find no support for the mispricing mechanism, but evidence consistent with the adverse selection mechanism. When asymmetric information is low, firms rationally issue equity to finance future investment. Moreover, equity is not mispriced when issued. Inconsistent with both market timing arguments however, issuing firms releverage through increased debt issues and within three years eliminate the impact of market timing on leverage.

Board Roles, Director Compensation, and CEO power

In a panel of more than 6,900 firms in 28 countries over 10 years we provide evidence that family control and labor market regulation are substitute governance mechanisms. First, family firms have performance advantages over non-family firms in countries with less regulated labor markets. This is robust to matching and using survey-based instruments for family control. Second, in less regulated labor markets, family firms have lower employment level variations supporting the claim that labor relations drive family firms’ performance advantages. Third, the performance advantages in less regulated labor markets is smaller in industries with high labor intensity and high labor volatility.

Corporate Governance and CEO Turnover Decisions

Prior research suggests that the effectiveness of corporate directors depends on their qualifications. We investigate whether directors’ qualifications are reflected in their pay. We find significant variation in director compensation both across and within boards, with more than a third of the variation in director pay attributable to differences among members of the same board. On average, more qualified directors receive higher pay, while CEO-appointed (“co-opted”) directors do not. However, co-opted directors receive higher pay on boards where the CEO’s influence is high. We also provide evidence that the market values qualified directors and discounts co-opted ones.

Do Qualifications Matter? New Evidence on Director Compensation

This paper provides a cross-country analysis to determine whether CEO turnover is a credible disciplining device for managers, whether it is effective in delivering performance improvements, and whether better governance improves the credibility and effectiveness of CEO turnover. The analysis is based on a detailed panel of 5,300 CEO years and spans two distinctly different financial systems- the U.K. and Germany-over the period 1995-2005. We find that CEOs face a credible threat of being removed for underperformance and that the hiring of new CEOs is effective in realizing large profitability improvements in the following years. We also find both relations to be virtually identical in both countries, despite large structural governance differences. Further, we consider a large number of firm-specific governance mechanisms previously proposed as indicators of better governance and find no evidence that any of them improves the observed relations between firm performance and CEO turnover. Taken together, our results suggest that replacing the CEO is an important component of successful turnarounds in underperforming firms and that this economic mechanism appears to work in nearly identical ways across very different financial markets, and across firms with very different quality of governance.

The Life Cycle of Family Ownership: International Evidence

Prior research suggests that the effectiveness of corporate directors depends on their qualifications. We investigate whether directors’ qualifications are reflected in their pay. We find significant variation in director compensation both across and within boards, with more than a third of the variation in director pay attributable to differences among members of the same board. On average, more qualified directors receive higher pay, while CEO-appointed (“co-opted”) directors do not. However, co-opted directors receive higher pay on boards where the CEO’s influence is high. We also provide evidence that the market values qualified directors and discounts co-opted ones.