Considering the Shareholder Perspective: Value-based Management Systems and Stock Market Performance

Review of Managerial Science, Vol. 5, No. 2, pp. 171-194

CEFS Working Paper No. 09-2010

29 Pages Posted: 18 May 2010 Last revised: 24 May 2012

See all articles by Marc Steffen Rapp

Marc Steffen Rapp

University of Marburg - School of Business & Economics; University of Marburg - Marburg Centre for Institutional Economics (MACIE)

Daniel A. Schellong

Technische Universität München (TUM)

Maximilian Schmidt

Technische Universität München (TUM) - Center for Entrepreneurial and Financial Studies (CEFS)

Michael Wolff

University of Göttingen

Date Written: May 18, 2010

Abstract

We empirically study the use of value-based management systems in listed German firms and examine implications for firms' stock market performance. Using a novel, hand-collected data set covering 1,083 firm years from 2002 to 2008, we find that value-based management systems become increasingly common. Specifically, in 2008 42% of our sample firms have implemented such a system. In the empirical analysis, we find that firms that implement value-based management systems earn statistically significant and economically substantial abnormal stock market returns measured within a two-year adoption phase. These excess returns are not jeopardized by poor post-adoption returns. In the analysis, we carefully control for risk and account for endogeneity concerns. Overall, our findings support the view that shareholders consider the adoption of a value-based management system as a credible signal that management will focus on shareholder interests and that such systems actually increase shareholder value.

Keywords: value-based management, corporate governance, econometric analysis, Germany

JEL Classification: G34, G30, G38

Suggested Citation

Rapp, Marc Steffen and Schellong, Daniel A. and Schmidt, Maximilian and Wolff, Michael, Considering the Shareholder Perspective: Value-based Management Systems and Stock Market Performance (May 18, 2010). Review of Managerial Science, Vol. 5, No. 2, pp. 171-194. Available at SSRN: https://ssrn.com/abstract=1610145

Marc Steffen Rapp (Contact Author)

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

University of Marburg - Marburg Centre for Institutional Economics (MACIE) ( email )

Am Plan
Marburg, 35032
Germany

Daniel A. Schellong

Technische Universität München (TUM) ( email )

Arcisstrasse 21
80333 Munich
Germany

Maximilian Schmidt

Technische Universität München (TUM) - Center for Entrepreneurial and Financial Studies (CEFS) ( email )

Arcisstraße 21
München, 80333
Germany

Michael Wolff

University of Göttingen ( email )

Platz der Göttinger Sieben 3
Göttingen, DE 37073
Germany

HOME PAGE: http://www.contolling.uni-goettingen.de

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