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Markus Schmid
Title
Prof. Dr.
Last Name
Schmid
First name
Markus
Email
markus.schmid@unisg.ch
Phone
+41 71 224 7001
Now showing
1 - 9 of 9
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PublicationFinancial Advice and Retirement SavingsWe use a unique dataset from a large retail bank to examine the impact of financial advice on personal retirement savings. We document that retirement-related financial advice is associated with an increase in tax-exempt retirement accounts and equity investments, both at the extensive as well as the intensive margin. Our analysis suggests a causal link. We find no evidence that advisors particularly help typically disadvantaged clients (female, poorer, less-educated). Additional investments into retirement accounts and equities primarily come from external sources and checking accounts. The bank also benefits from the provision of retirement-related financial advice.
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PublicationType: journal articleJournal: Review of Financial StudiesVolume: 31Issue: 11DOI: 10.1093/rfs/hhy046
Scopus© Citations 30 -
PublicationThe Impact of Financial Advice on Trade Performance and Behavioral BiasesWe use a dataset from a large retail bank to examine the impact of financial advice on investors’ stock trading performance and behavioral biases. Our data allow us to classify each individual trade as either advised or independent and to compare them in a trade-bytrade within-person analysis. Thus, our study is not plagued by the endogeneity problems typically faced by studies on financial advice. We document that advisors hurt trading performance. However, they help to reduce some of the behavioral biases retail Investors are subject to, but this does not overcompensate the negative performance effects of the bad stock recommendations.
Scopus© Citations 36 -
PublicationIs There Really No Conglomerate Discount?Recent research questions the existence of a conglomerate discount. This study addresses two of the most important explanations for the conglomerate discount and finds evidence in support of an economically and statistically significant discount. The first explanation is that the risk-reducing effect of diversification increases debt value and consequently the use of the book value of debt leads to an underestimation of firm value in diversified firms. We show that the effect of using an imputed market value of debt reduces the conglomerate discount only by a small fraction. However, consistent with the value-transfer hypothesis, we find the discount to increase in leverage and no discount for all-equity firms. An agency cost-based explanation, which reconciles these conflicting findings, is that managers in levered firms become aligned with creditors and reduce firm risk at the expense of shareholders. Hence, the diversification discount only occurs in levered firms and stems from conflicts of interest between managers and shareholders over corporate risk taking. Second, the conglomerate discount may emerge from a neglect of the endogenous nature of the diversification decision. We first show that the conglomerate discount in fact disappears when we account for endogeneity in a Heckman selection model. However, when we account for fixed effects, the conglomerate discount remains statistically and economically significant, also in a Heckman selection-model or instrumental variables framework.Type: journal articleJournal: Journal of Business Finance and AccountingVolume: 39Issue: 1-2
Scopus© Citations 39 -
PublicationHow Much of the Diversification Discount Can be Explained by Poor Corporate Governance?We investigate whether the diversification discount occurs partly as an artifact of poor corporate governance. In panel data models, we find that the discount narrows by 16% to 21% when we add governance variables as regression controls. We also estimate Heckman selection models that account for the endogeneity of diversification and dynamic panel generalized method of moments models that account for the endogeneity of both diversification and governance. We find that the diversification discount persists even with these controls for endogeneity. However, in selection models the discount disappears entirely when we introduce governance variables in the second stage, and in dynamic panel GMM models the discount narrows by 37% when we include governance variables.Type: journal articleJournal: Journal of Financial EconomicsVolume: 103Issue: 1
Scopus© Citations 210 -
PublicationFinancial Advice and Retirement Savings
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PublicationType: newspaper articleJournal: Neue Zürcher Zeitung NZZVolume: 228Issue: 191
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PublicationThe Long-Term Performance of IPO's, RevisitedPrior research on IPO long-term performance, focusing on three- to five-year post-issue periods, shows that the apparent IPO underperformance disappears when different risk exposures across IPO and mature firms are accounted for by using a Carhart (1997) factor model. We show that a sample of 7,487 U.S. IPOs between 1975 and 2014 continues to significantly underperform mature firms in terms of Carhartalphas over the first year after going public when using conventional portfolio sorts. This result prevails across various sub-samples, and also withstands a battery of robustness checks extending the Carhart (1997) factor model with multiple firm characteristics in a statistically robust setting. Further econometric tests, however, reveal that the apparently robust IPO underperformance is likely to be the result of omitted, yet persistent, firm-specific factors rendering IPO firms different from mature firms. Specifically, we find IPO underperformance to disappear when accounting for unobservable heterogeneity across firms.
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PublicationDoes Unobservable Heterogeneity Matter for Portfolio-Based Asset Pricing Tests?We show that portfolio sorts, as widely used in empirical asset pricing, tend to misattribute cross-sectional return predictability to the firm characteristic underlying the sort. Such misattribution arises if the sorting variable correlates with a firm-spe-cific effect capturing unobservable heterogeneity across firms. We propose a new, firm-level regression approach that can reproduce the results from standard portfolio sorts. Besides, our method handles multivariate firm characteristics and, if firm fixed effects are included, is robust to misattributing cross-sectional return predictability. Our empirical results confirm that portfolio sorts have limited power in detecting ab-normal returns: Several characteristics-based factors lose their predictive power when we control for unobservable heterogeneity across firms.Type: working paperVolume: 2017/17Issue: 17