Managerial Ownership and Company Performance in German Small and Medium-Sized Private Enterprises
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.
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Volume (Year): 7 (2006)
Issue (Month): (May)
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