Markus Schmid
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Schmid
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Markus
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markus.schmid@unisg.ch
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+41 71 224 7001
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  • Publication
    Is Director Industry Experience Valuable?
    (Financial Management Association, 2016)
    von Meyerinck, Felix
    ;
    Oesch, David
    ;
    Schmid, Markus
    We investigate whether investor reactions to the announcement of a new outside director appointment significantly depend upon the director's experience in the appointing firm's industry. Our sample includes 688 outside director appointments to boards of S&P 500 companies from 2005 to 2010. We find significantly higher announcement returns upon appointments of experienced versus inexperienced directors. To alleviate endogeneity concerns, we use the deaths of 200 directors holding 280 outside directorships as an identification strategy and find significantly more negative announcement returns associated with the deaths of experienced versus inexperienced directors. However, while our results are robust to accounting for time-fixed unobservable director and firm characteristics, we still cannot completely rule out endogenous firm-director matching driving our results.
    Type: journal article
    Journal: Financial Management
    Volume: 45
    Issue: 1
    DOI: 10.1111/fima.12089
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/105602
    Scopus© Citations 35
  • Publication
    Type: conference paper
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/102909
  • Publication
    Type: conference paper
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/106564
  • Publication
    Industry Expert Directors
    ( 2015-12-16)
    Drobetz, Wolfgang
    ;
    von Meyerinck, Felix
    ;
    Oesch, David
    ;
    Schmid, Markus
    We analyze the valuation effect of board industry experience and channels through which industry experience of outside directors affects firm value. Our analysis shows that firms with more experienced outside directors are valued at a premium compared to firms with less experienced outside directors. Additional analyses, including a quasi-experimental setting based on director deaths, mitigate endogeneity concerns. Further tests show that the board industry experience-firm value relation is more pronounced for firms with larger investment programs, larger cash reserves, and during crises. In contrast, it is weaker in more dynamic industries where the value of previously acquired experience is likely to be diminished. We also provide some evidence that corporate governance problems in firms, in particular entrenched CEOs, and a limited supply of industry experts prevent firms from appointing more industry experts to their boards, even though this would be value-increasing. Overall, our findings are consistent with board industry experience being a valuable corporate governance mechanism.
    Type: conference paper
    DOI: 10.2139/ssrn.2256477
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/105622
  • Publication
    Industry Expert Directors
    (SoF-HSG, )
    Drobetz, Wolfgang
    ;
    von Meyerinck, Felix
    ;
    Oesch, David
    ;
    Schmid, Markus
    We analyze the valuation effect of board industry experience and channels through which in- dustry experience of outside directors affects firm value. Our analysis shows that firms with more experienced outside directors are valued at a premium compared to firms with less expe- rienced outside directors. Additional analyses, including a quasi-experimental setting based on director deaths, mitigate endogeneity concerns. Further tests show that the board industry ex- perience-firm value relation is more pronounced for firms with larger investment programs, larger cash reserves, and during crises. In contrast, it is weaker in more dynamic industries where the value of previously acquired experience is likely to be diminished. We also provide some evidence that corporate governance problems in firms, in particular entrenched CEOs, and a limited supply of industry experts prevent firms from appointing more industry experts to their boards, even though this would be value-increasing. Overall, our findings are consistent with board industry experience being a valuable corporate governance mechanism.
    Type: working paper
    Volume: 2014/01
    Issue: 01
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/116457
  • Publication
    CEO Turnover and Director Reputation
    von Meyerinck, Felix
    ;
    Romer, Jonas
    ;
    Schmid, Markus
    This paper analyzes the reputational effects of forced CEO turnovers on outside directors. We find that outside directors interlocked to a forced CEO turnover experience a large and persistent increase in withheld votes at subsequent board re-elections relative to non-turnover-interlocked directors. Increases in withheld votes are confined to departures without a successor in place, performance-induced turnovers, and turnovers that occur during the most productive time within a CEO's tenure. Reputational losses are larger for board committee members responsible for hiring and monitoring the ousted CEO and for directors affiliated with the CEO. Involvement in a forced CEO turnover is not associated with a long-term loss in directorships, but lost directorships are replaced by directorships at smaller firms. Our results imply that forced CEO turnovers signal a governance failure at the board level and that investors rely on salient actions to update their beliefs about directors' hidden qualities.
    Type: working paper
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/116799
  • Publication
    Consequences of Data Errors for the Validity of the E-index as a Proxy for Corporate Governance
    ( 2021-07)
    Karthaus, Larissa
    ;
    von Meyerinck, Felix
    ;
    Schmid, Markus
    The E-index is one of the most widely used proxy variables for corporate governance in empirical research. We show that ISS data contain a significant number of measurement errors and misreported values. We use alternative databases to manually check deviations across databases and to construct a corrected E-index. We then revisit analyses conducted in three well-known and widely-cited studies using the E-index and compare results from using either ISS or corrected data to construct the E-Index. The results show that data errors in ISS result in a substantially overestimated negative association between the E-index and firm value. Moreover, data errors in ISS lead to incorrect conclusions regarding the relationship between the E-index and different measures of operating performance and analysts’ earnings forecasts. In summary, our results show that data quality is an important issue when measuring corporate governance.
    Type: working paper
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/110258
  • Publication
    Competition and the reputational costs of litigation
    ( 2021-04)
    von Meyerinck, Felix
    ;
    Pursiainen, Vesa
    ;
    Schmid, Markus
    We study the role of competition in customers’ reactions to litigation against firms, using anonymized mobile phone location data. A class action lawsuit filing results in a 4% average reduction in customer visits to target firms’ outlets in the following months. The effect strongly depends on competition. Outlets facing more competition experience significantly larger negative effects. Closer competition matters more, both in terms of geographic and industry proximity. Announcement returns and quarterly accounting revenues around lawsuit filings also strongly depend on competition. Our results suggest that competition is an important component in customers’ ability to discipline firms for misbehavior.
    Type: working paper
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/110532
  • Publication
    As California Goes, So Goes the Nation? Board Gender Quotas and the Legislation of Non-Economic Values
    (SoF-HSG, 2019-12-19)
    von Meyerinck, Felix
    ;
    Niessen-Ruenzi, Alexandra
    ;
    Schmid, Markus
    ;
    Solomon, Steven Davidoff
    In 2018, California became the first U.S. state to introduce a mandatory board gender quota for all firms headquartered in the state. We document negative announcement returns to the adoption of the quota for Californian firms, but also large negative spillover effects on a matched group of non-Californian firms, particularly those located in states that followed California’s legislative lead in the past by raising minimum wages or legalizing cannabis. Frictions on the director labor market only explain a small fraction of value losses of Californian firms. They do not explain the negative spillover effects on firms in other states. We propose shareholders’ fear of further legislation of non-economic values as a new explanation for the negative announcement returns to gender quotas. In line with this view, we find that firms with higher policy sensitivity show the strongest reaction.
    Type: working paper
    Volume: 2019
    Issue: 2019/04
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/97932
  • Publication
    Peer Pressure in Corporate Earnings Management
    ( 2017)
    Charles, Constantin
    ;
    Schmid, Markus
    ;
    von Meyerinck, Felix
    We show that peer firms play an important role in shaping corporate earnings management de-cisions. To overcome identification issues in isolating peer effects, we use fund flow-induced selling pressure by passive open-end equity mutual funds as exogenous shocks to firms’ stock prices. Managers respond to such exogenous price shocks by adjusting earnings management policies. We then measure individual firms’ reactions to changes in earnings management at peer firms as a result of such exogenous price shocks. The documented peer effect in earnings management is not only statistically, but also economically significant. Our results are robust to alternative measures of fund flow-induced selling pressure and earnings management, and to estimating instrumental variables regressions in which we instrument peer firms’ earnings man-agement with mutual fund flow-induced selling pressure.
    Type: working paper
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/102908