Managerial Incentives and Firm Valuation - Evidence from Switzerland

45 Pages Posted: 23 Aug 2005

See all articles by Markus Schmid

Markus Schmid

University of St. Gallen - Swiss Institute of Banking and Finance; University of St. Gallen - School of Finance

Heinz Zimmermann

University of Basel - Center for Economic Science (WWZ) - Department of Finance

Date Written: July 2007

Abstract

This paper presents an integrated analysis of the relationships between managerial share ownership (or alternatively the percentage of equity-based compensation), four additional corporate governance mechanisms, and firm value by explicitly incorporating the simultaneity of the process determining these variables into the empirical investigation. For a sample of 145 Swiss firms, we find a significantly positive valuation effect of managerial shareholdings and the percentage of equity-based compensation including shares and options. We also find significant relationships between various corporate governance proxies indicating that several mechanisms are substituted for each other. This finding clarifies the importance of using a simultaneous equations approach and treating governance mechanisms (and firm value) as endogenous variables.

Keywords: Corporate governance, ownership structure, equity-based compensation, firm valuation, endogeneity

JEL Classification: G32, G34

Suggested Citation

Schmid, Markus and Zimmermann, Heinz, Managerial Incentives and Firm Valuation - Evidence from Switzerland (July 2007). Available at SSRN: https://ssrn.com/abstract=784187 or http://dx.doi.org/10.2139/ssrn.784187

Markus Schmid (Contact Author)

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Rosenbergstrasse 52
St. Gallen, 9000
Switzerland

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Heinz Zimmermann

University of Basel - Center for Economic Science (WWZ) - Department of Finance ( email )

Peter Merian Weg 6
Basel, 4002
Switzerland
+41 61 267 33 16 (Phone)
+41 61 267 08 98 (Fax)

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