Marc Steffen Rapp

Die arbitragefreie Adjustierung von Diskontierungssätzen bei einfacher Gewinnsteuer

ZusammenfassungDie Idee der gewichteten Kapitalkosten (WACC) für mehrperiodige Investitionsprojekte wurde erstmals 1980 von Miles/Ezzell im Kontext einer einfachen Gewinnsteuer und einem wertabhängigen Finanzierungsregime diskutiert. Wir erweitern das Modell auf Investitionsprojekte mit (i) allgemeineren Cashflow-Strukturen und (ii) ausfallbedrohtem Fremdkapital. Dazu unterscheiden wir zwischen Diskontierungsfaktoren für individuelle Cashflows und erwartete Investitionsrenditen eines Projektes. Wir leiten eine Relation ab, welche die Diskontierungssätze bei vollständiger Eigenfinanzierung mit den Diskontierungssätzen bei teilweiser Fremdfinanzierung verknüpft. Mittels eines Aggregationsmechanismuses für Diskontierungsfaktoren zeigen wir anschließend, dass die Anwendung dieser Relation auf Investitionsrenditen im Allgemeinen zu Fehlbewertungen führt.SummaryFor investment projects with finite horizon and deterministic leverage the idea of weighted average cost of capital (wacc) was introduced 1980 by Miles/Ezzell under restrictive assumptions. In this paper we deal with the wacc idea in the context of arbitrage-free capital markets by relaxing the assumptions of Miles/Ezzell. In particular we allow for general cash flow structures and risky debt. Following Milesl/Ezzell we restrict ourselves to the situation of a linear tax on corporate level and debt financing according to a deterministic leverage. Under these conditions we derive an arbitrage-free relation that links the discount rates of a particular cash flow of a fully equity financed project with discount rates of the cash flow of a debt-financed project. Furthermore we show that in general this relation may not be applied to expected returns of the project.

Risikofaktoren und Multifaktormodelle für den Deutschen Aktienmarkt (Risk Factors and Multi-Factor Models for the German Stock Market)

Der deutsche Aktienmarkt sah sich in den letzten 15 Jahren substantiellen Veranderungen gegenuber, welche unter anderem in eine zunehmende Internationalisierung und deutlich erhohten Streubesitz mundeten. In der vorliegenden Arbeit untersuchen wir, inwieweit dies die aus klassischen Multifaktormodellen bekannten Risikofaktoren beeinflusste. Basierend auf den Renditen derCDAX-Unternehmen von Juli 1996 bis Juni 2011 dokumentieren wir vier wesentliche Ergebnisse. Erstens finden wir eine insignifikant (positive) Marktrisikopramie, eine signifikant negative Grosenpramie (Size Premium), eine signifikant positive Substanzpramie (Value Premium) und eine signifikant positive Momentumpramie (Momentum Premium). Zweitens zeigen sich alle vier Faktoren untereinander nur schwach bzw. negativ korreliert und teilweise mit internationalen Gegenstucken nur schwach korreliert. Drittens zeigt sich, dass Renditen von Aktienportfolios, sortiert nach Marktkapitalisierung und Buch-Marktwert-Verhaltnis, durch ein Dreifaktorenmodell nach Fama French (1993) substantiell besser erklart werden, als durch ein Einfaktormodell in Anlehnung an das klassische Capital Asset Pricing Model. Der zusatzliche Erklarungsbeitrag des Momentumfaktors in Anlehnung an Carhart (1997) ist hingegen marginal. Letztendlich argumentieren wir daher vor dem Hintergrund der bekannten Literatur und unserer Ergebnisse fur eine landerspezifische Erweiterung des Capital Asset Pricing Models.

Equilibrium Security Prices with Capital Income Taxes and an Exogenous Interest Rate

We are interested in the effect of capital income taxes upon security prices when investors face locally segmented stock markets and a global bond market. Therefore, we analyze an equilibrium model of an economy with binomial uncertainty, an exogenous risk-free interest rate, and a representative stand-in household. In this setting, the pricing effect for domestic securities is shown to be a function of three variables: the covariance between pretax payoffs of securities and the aggregated market portfolio, the exogenous pretax interest rate, and the effect of taxation (and redistribution) on the aggregate welfare of the stand-in household. We find that taxation of capital income is nondistorting if tax proceeds are immediately redistributed within the cohort of capital market participants. If, however, taxation represents a policy tool to transfer wealth from capital market participants to non-market-participants, then the level of the statutory tax rate is reflected in equilibrium security prices, and taxation affects households portfolio decisions, which in turn may affect investment decisions of firms.

Corporate Governance and Its Impact on R&D Investment in Emerging Markets

ABSTRACT Corporate R&D activities are inherently risky but also difficult to monitor. Against this background, we examine the impact of ownership concentration and legal shareholder rights protection on corporate R&D investments in emerging markets. Based on a comprehensive sample of publicly listed firms from 24 countries, we find that R&D intensity is lower in firms with (strategic) block ownership, and this effect is more pronounced in countries with stronger shareholder rights protection. This suggests that, similar to the situation in developed economies, dispersed ownership, which allows shareholders to diversify their investment risks, is beneficial for corporate R&D and that this effect is intensified by more developed institutions.

Kodexakzeptanz 2012: Analyse der Entsprechenserklärungen zum Deutschen Corporate Governance Kodex (Code Compliance 2012: Analysis of the Declarations of Conformity with the German Corporate Governance Code)

Im Februar 2002 wurde in Berlin die erste Version des Deutschen Corporate Governance Kodex (DCGK) der Offentlichkeit prasentiert. Zehn Jahre spater analysiert und bewertet die vorliegende Studie systematisch und umfassend die Akzeptanz des Kodex und das Complianceverhalten der grosten durch den DCGK adressierten Gesellschaften anhand der durch §161 AktG vorgeschriebenen Entsprechenserklarungen.Die Studie untersucht zunachst das grundsatzliche Niveau der Kodexakzeptanz, aber auch das Entsprechensverhalten der Gesellschaften auf Kapitel-, Ziffer- bis hin auf Satzebene. Erstmals untersucht die Studie die Governance Qualitat der Gesellschaften basierend auf vier eigens hierfur konstruierten Governance Indizes, welche die Kernbereiche Governance – Transparenz, Kontrolle/Uberwachung, Anreizsysteme und Vielfalt – abbilden. Erganzt wird dies um Analysen hinsichtlich des Verhaltens bzgl. Kodexanregungen, des Zusammenhangs zwischen Complianceverhalten und Unternehmensgrose bzw. Eigentumerstruktur und eine Analyse der im Rahmen der Entsprechenserklarungen gegebenen Erlauterungen.Im Rahmen der Studie werden die bis Marz 2012 veroffentlichten Entsprechenserklarungen (gemas §161 AktG) der in DAX und MDAX gelisteten Gesellschaften analysiert. Die untersuchten Unternehmen reprasentieren zu Ende 2011 etwa 90% der Marktkapitalisierung des Prime und General Standard der Deutschen Borse, sodass die Studie einen umfassenden und gleichzeitig individuell-differenzierten Blick auf die Akzeptanz des Deutschen Corporate Governance Kodex in den grosten deutschen Aktiengesellschaften liefert.In February 2002 the Government Commission appointed by the German Justice Minister presented the first version of the German Corporate Governance Code (GCGC). Ten years later the Code Compliance Study 2012 examines the acceptance level of the current version of the GCGC within DAX and MDAX firms. The study analyses overall compliance, as well as the firms’ compliance behavior on the level of chapters, paragraphs and even single recommendations. The study also presents four novel governance indices that measure firms’ compliance behavior along the key dimensions of governance (transparency, monitoring/control, incentives and diversity) and evaluates firms along these measures. Moreover, compliance behavior with respect to Codes suggestions as well as the relationship between firm characteristics and compliance levels is analyzed. Overall, the study presents a broad and comprehensive view on code compliance behavior of German listed firms.

Disentangling the Effects of State Ownership on Investment – Evidence from Europe

We investigate the relation between state ownership and corporate investment. In a matched panel of 624 European firms, state ownership curtails firms’ responsiveness to investment opportunities. With increasing government ownership, investment becomes more sensitive to internal funds when capital constraints or financing needs are high, or government has limited control over domestic banks. State ownership negatively affects investment levels but mitigates reductions during the financial crisis. We address identification concerns both econometrically and through references to existing privatization research. Overall, our evidence suggests that state ownership is associated with inefficient but stability-seeking investment policies and increased levels of capital constraints.

Non-Mandatory Say on Pay Votes and AGM Participation: Evidence from Germany

Since August 2009, German legislation allows for voluntary Say on Pay Votes (SoPV) during Annual General Meetings (AGMs). We examine 1,169 AGMs of all German listed firms with more than 10,000 agenda items over the period 2010-2013 to identify (1) determinants and approval rates of voluntary SoPVs, (2) the effect of voluntary SoPVs on AGM participation, and (3) the effect of SoP on executive compensation. Our data reveals that in the first four years of the voluntary say on pay regime every second firm in our sample has opted for having a SoPV. The propensity for a SoPV increases with firm size, abnormal executive compensation and free float of shares. Indeed, smaller firms with concentrated ownership do not only have a lower propensity for a SoPV, but also show a higher propensity to opt for only limited disclosure of executive compensation. Approval rates of SoPVs are lower than the approval rate for the average AGM agenda item and this effect is stronger in (i) widely held firms as well as in (ii) firms with abnormal executive compensation. Additionally, SoPVs actually can increase AGM participation; however, this result is particularly evident for widely held firms. Finally, we find stronger pay for performance elements within total executive compensation, particularly when the effect of executive compensation is lagged over the years following the vote. Overall, our results are consistent with the view that firms use voluntary SoPV to gain legitimation for executive remuneration policies in firms with low ownership concentration. This is enforced, where (small) shareholders consider executive compensation a part of the agency problem of listed firms, and where (small) shareholders consider SoPVs as a possibility to actively influence corporate decisions, with these decisions leading to a higher degree of alignment between executive management boards and shareholders.

Regulation and the Anatomy of Ownership Structures in European Listed Firms

This paper explores an extensive novel panel-data set covering more than 4,000 listed firms in 16 European countries to study the effects of shareholder protection on ownership structure and firm performance. Recent research criticizes the existing law and finance literature using (i) small-sample country averages and (ii) legal indices of the first generation and casts serious doubts on the seemingly well-established negative correlation between shareholder protection and ownership concentration. Examining overall ownership concentration we provide supportive evidence for a negative effect of shareholder rights, even when we examine a large sample of firms, account for a broad set of firm level characteristics and use second generation legal indices measuring shareholder protection. However, when we differentiate between shareholder types, we find that this effect is mainly driven by strategic investors (including families) and institutional ownership is actually positively correlated to the level of shareholder protection. The latter effect, in turn is mainly driven by independent institutional investors. Examining the effect on firm valuation, we find that while independent institutional investors fuel firm valuation, strategic investors jeopardize firm valuation. Thus, our findings support the view that blockholdings of strategic investors emerge (or survive) in case of limited minority protection at the expense of minority blockholders. Altogether our results contribute to a better understanding of the mechanisms between legal protection, ownership structures and firm valuation.

Remuneration of Non-Executive Directors in German Listed Firms: An Empirical Note

In the last years, non-executive directors are facing increasing duties and (legal) responsibilities. From that perspective, it is quite surprising that the remuneration of non-executive directors has received rather little attention so far. In this study we examine the German experience. We present the status quo of non-executive director remuneration and discuss its challenges. Specifically, we will look at the level of director remuneration and the (possible) problem of limited incentives.

Women on German management boards

In this paper we want to investigate the impact of company owners on the low percentage of women on management boards and whether they are attempting to increase this percentage. After analysing whether ownership concentration influences the number of women on management boards we distinguish between different types of owners. We find that ownership concentration has no effect on the presence of women on German management boards, we show however that institutional and individual owners have a significantly positive effect. Classifying institutional owners into national and foreign owners illustrates that foreign investors are the primary driver of the positive effect within the class of institutional owners; the presence of national investors that are strongly influenced by the national banking system does not show any effect. Our analyses are based on 15,976 management board member positions from 2000 to 2007 in approximately 600 German-listed companies.