Peter Limbach

Underwriter Reputation and the Quality of Certification: Evidence from High-Yield Bonds

This paper provides primary evidence of whether certification via reputable underwriters is beneficial to investors in the corporate bond market. We focus on the high-yield bond market, in which certification of issuer quality is most valuable to investors owing to low liquidity and issuing firms’ high opacity and default risk. We find bonds underwritten by the most reputable underwriters to be associated with significantly higher downgrade and default risk. Investors seem to be aware of this relation, as we further find the private information conveyed via the issuer-reputable underwriter match to have a significantly positive effect on at-issue yield spreads. Our results are consistent with the market-power hypothesis, and contradict the traditional certification hypothesis and underlying reputation mechanism.

Family Exit in Family Firms: How Network Ties Affect the Owner’s Intention to Follow the Private Equity Succession Route

We study private equity as a succession route in family firms. Using survey data from Germany, we empirically examine the role owner-managers and their network ties play in the early process of firm succession. Our evidence suggests that network ties, strong ties in particular, matter to owner-managers when they consider a sale to private equity. Applying the Theory of Planned Behavior, we find that subjective norms and attitude explain the intention to sell to private equity investors, while entrepreneurial network ties explain the subjective norm component. We further show that subjective norm mediates the relationship of network ties on intention.

Auswirkungen guter Corporate Governance und Compliance auf den Unternehmenswert

In den letzten Jahren hat die Bedeutung von Corporate Governance und Compliance in der unternehmerischen Praxis rasant zugenommen. Der vorliegende Beitrag stellt zunachst die Notwendigkeit von Corporate Governance und die bedeutendsten Governance-Mechanismen im unternehmerischen Kontext vor. Darauf aufbauend wird anhand der bestehenden wissenschaftlichen Literatur uberpruft, ob eine gute Corporate Governance bzw. eine gute Compliance wertrelevant ist oder nicht

Trust and Shareholder Voting

We test the hypothesis whether a specific aspect of culture – trust in others – affects shareholder voting behavior by substituting for costly monitoring. We find consistent evidence that the percentage of votes cast at shareholder meetings is lower in high-trust countries while the percentage of votes in support of management proposals is higher. Shocks to trust and IV regressions confirm these results. We also find that shareholder voting is more valuable in lowtrust countries, as reflected by a more positive effect on future firm performance, which suggests that managers do not exploit lower levels of monitoring when trust is high.

Are Generalists Beneficial to Corporate Shareholders? Evidence from Exogenous Executive Turnovers

This study finds a positive, economically meaningful impact of generalist chief executive officers (CEOs) on shareholder value using 164 sudden deaths and 345 non-sudden exogenous turnovers. The higher a departing CEO’s general ability index (GAI), independently and relative to her successor, the lower is the abnormal stock return to turnover announcements. Returns reflect post-turnover changes in operating performance. Further, CEOs’ and successors’ GAIs are significantly positively related, but only for non-sudden turnovers. Consistently, for sudden deaths, we find positive stock returns to appointments of generalist successors. The results provide a market-based explanation for the generalist pay premium.

Are generalists beneficial to corporate shareholders? Evidence from sudden deaths

This study finds a positive, economically meaningful impact of generalist chief executive officers (CEOs) on shareholder value using 164 sudden deaths and 345 non-sudden exogenous turnovers. The higher a departing CEO’s general ability index (GAI), independently and relative to her successor, the lower is the abnormal stock return to turnover announcements. Returns reflect post-turnover changes in operating performance. Further, CEOs’ and successors’ GAIs are significantly positively related, but only for non-sudden turnovers. Consistently, for sudden deaths we find positive stock returns to appointments of generalist successors. The results provide a market-based explanation for the generalist pay premium.

Do CEOs Matter? Corporate Performance and the CEO Life Cycle

Our study is the first to provide systematic evidence of a hump-shaped CEO tenure-firm value relation. This pattern is supported by announcement returns to sudden CEO deaths, which mitigate endogeneity concerns. Furthermore, the hump shape is subject to meaningful cross-sectional variation: firm value starts to decline after fewer years of CEO tenure i) in more dynamic industries, in which the optimal CEO-firm match changes more frequently, ii) if CEOs are less adaptable to changes, iii) if CEO entrenchment is higher. Lastly, financial reporting quality also follows a hump shape while earnings smoothing increases over CEO tenure, suggesting that CEOs entrench themselves by obfuscating their declining performance. While we find evidence suggesting optimal retention by boards on average, some CEOs stay past their “peak”, primarily because of a deteriorating CEO-firm match in conjunction with increasing entrenchment.

Today’s or yesterday’s news?

II. Ereignisstudie, Werteffekte und Analyse der Berichtsfristen . . . . . . . . . . . 711 1. Methodische Grundlagen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711 2. Datenerhebung . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 714 3. Empirische Ergebnisse zu Werteffekten . . . . . . . . . . . . . . . . . . . . . . 717 4. Empirische Ergebnisse zu Berichtszeiträumen . . . . . . . . . . . . . . . . . . 730

Does CEO Fitness Matter

This study finds a positive relation between CEO fitness and firm value. For each of the years 2001 to 2011, we define CEOs of S&P 1500 companies as being fit if they finish a marathon. The literature suggests that fitness moderates stress and positively affects cognitive functions and performance. Accordingly, we find the strongest effects on firm value in subsamples where fitness is most important, i.e., for CEOs with high workload, above median age, and above median tenure. Fit CEOs are further associated with significantly higher abnormal announcement returns in M&A bids for large, public, and cross-border targets, concomitant with high stress. Our findings can explain the importance of CEO fitness in the managerial labor market and the trend among CEOs to stay fit. JEL classification: G32, G34, J24

Once Bitten, Twice Shy: How Unconsummated Deals Affect Subsequent M&As

We examine how a bidder’s failure to consummate a deal affects its subsequent M&As. After experiencing unconsummated M&As, firms choose smaller targets than before, more likely hire advisors, hire more advisors, and more likely make cash bids. Effects are strongest for bids directly succeeding unconsummated deals, but tend to linger over time and with CEOs. Deal failure exogenous to the acquirer, used for identification, is not associated with the aforementioned effects. Results suggest that firms reduce risks of deal problems and failure to protect their reputation for assessing and consummating investments. Consistent with this interpretation, we find negative abnormal announcement returns when deal failure repeats.