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Managerial Ownership and Company Performance in German Small and Medium-Sized Private Enterprises

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  • Elisabeth Mueller
  • Alexandra Spitz-Oener

Abstract

We analyse the relationship between managerial ownership and company performance, testing the incentive and entrenchment hypothesis. Differently from previous literature, we focus on small and medium-sized private enterprises which constitute an important part of the German economy. We use a panel of 356 companies in the German business-related service sector for the years 1997-2000. Our findings are that performance, measured by survey-based profit information, is increasing in managerial ownership by up to around 40 per cent. We do not find a significant entrenchment effect, possibly because, at levels at which managers could become entrenched, they already bear a large proportion of the costs and have therefore an incentive to maximize company value. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd. 2006.

Suggested Citation

  • Elisabeth Mueller & Alexandra Spitz-Oener, 2006. "Managerial Ownership and Company Performance in German Small and Medium-Sized Private Enterprises," German Economic Review, Verein für Socialpolitik, vol. 7, pages 233-247, May.
  • Handle: RePEc:bla:germec:v:7:y:2006:i::p:233-247
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    References listed on IDEAS

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    1. Januszewski, Silke I. & Koke, Jens & Winter, Joachim K., 2002. "Product market competition, corporate governance and firm performance: an empirical analysis for Germany," Research in Economics, Elsevier, vol. 56(3), pages 299-332, September.
    2. Kaiser, Ulrich & Kreuter, Markus & Niggemann, Hiltrud, 2000. "The ZEW - Creditreform business survey in the business-related services sector : sampling frame, stratification, expansion and results," ZEW Discussion Papers 00-22, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation," Scholarly Articles 29407535, Harvard University Department of Economics.
    4. James S. Ang & Rebel A. Cole & James Wuh Lin, 2000. "Agency Costs and Ownership Structure," Journal of Finance, American Finance Association, vol. 55(1), pages 81-106, February.
    5. Mehran, Hamid, 1995. "Executive compensation structure, ownership, and firm performance," Journal of Financial Economics, Elsevier, vol. 38(2), pages 163-184, June.
    6. Bennedsen, Morten & Fosgerau, Mogens & Wolfenzon, Daniel, 2000. "Control Dilution And Distribution Of Ownership," Working Papers 16-2000, Copenhagen Business School, Department of Economics.
    7. McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
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    Cited by:

    1. Väänänen, Lotta, 2003. "Agency Costs and R&D: Evidence from Finnish SMEs," Discussion Papers 859, The Research Institute of the Finnish Economy.
    2. Mina Zare & Mahmoud Moeinadin & Forough Heyrani, 2014. "Investigating the Relationship between Board Characteristics and the Sustainable Development of Companies Listed at Tehran Stock Exchange," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(6), pages 384-401, June.
    3. Anaïs Hamelin-Schertzer, 2009. "Do small family businesses have a peculiar attitude toward growth? Evidence from French SMEs," Working Papers CEB 09-032.RS, ULB -- Universite Libre de Bruxelles.
    4. Meyer, Jenny, 2007. "Older Workers and the Adoption of New Technologies," ZEW Discussion Papers 07-050, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Hsu-Huei Huang & Min-Lee Chan & Chih-Hsiang Chang & Jing-Ling Wong, 2012. "Is Corporate Governance Related to the Conservatism in Management Earnings Forecasts?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(0), pages 105-121, July.
    6. Hsu-Huei Huang & Min-Lee Chan & Chih-Hsiang Chang & Jing-Ling Wong, 2012. "Is Corporate Governance Related to the Conservatism in Management Earnings Forecasts?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(0), pages 105-121, July.
    7. Marko Simoneti & Aleksandra Gregoric, 2004. "Managerial ownership and corporate performance in Slovenian post-privatisation period," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 1(2), pages 217-241, December.
    8. Jenny Meyer, 2010. "Does Social Software Support Service Innovation?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 17(3), pages 289-311.
    9. Haris Arshad & Attiya Yasmin Javid, 2014. "Does Inside Ownership Matters in Financial Decisions and Firm Performance: Evidence from Manufacturing Sector of Pakistan," PIDE-Working Papers 2014:107, Pakistan Institute of Development Economics.
    10. Huang, Hsu-Huei & Chan, Min-Lee & Huang, I-Hsiang & Chang, Chih-Hsiang, 2011. "Stock price volatility and overreaction in a political crisis: The effects of corporate governance and performance," Pacific-Basin Finance Journal, Elsevier, vol. 19(1), pages 1-20, January.
    11. Jenny Meyer, 2011. "Workforce age and technology adoption in small and medium-sized service firms," Small Business Economics, Springer, vol. 37(3), pages 305-324, October.
    12. Anaïs Hamelin, 2013. "Influence of family ownership on small business growth. Evidence from French SMEs," Small Business Economics, Springer, vol. 41(3), pages 563-579, October.
    13. Meyer, Jenny, 2008. "The Adoption of New Technologies and the Age Structure of the Workforce," ZEW Discussion Papers 08-045, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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