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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
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1 - 10 of 60
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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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PublicationCEO Tenure and Firm Value(American Accounting Association, 2021-12)
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PublicationHedge fund liquidity and performance : Evidence from the financial crisisWe investigate how share restrictions affect hedge fund performance in crisis and non-crisis periods. Consistent with prior research, we find that in the pre-crisis period more illiquid funds generate a share illiquidity premium compensating investors for limited liquidity. In the crisis period, this share illiquidity premium turns into an illiquidity discount. Hedge funds with more stringent share restrictions invest more heavily in illiquid assets. While share restrictions enable funds to manage illiquid assets effectively in the pre-crisis period, they seem insufficient to ensure effective management of illiquid portfolios in the crisis. In a crisis period, funds holding illiquid portfolios experience lower returns and alphas, also when share restrictions are controlled for. Funds with an asset-liability mismatch perform particularly poorly and experience the strongest outflows. Share restrictions are also a proxy for incentives as investors cannot immediately withdraw their money after poor performance. We show that higher incentive fees can offset the share illiquidity discount in the crisis period.Type: journal articleJournal: Journal of Banking and FinanceVolume: 37Issue: 03
Scopus© Citations 28 -
PublicationRisk Management, Corporate Governance, and Bank Performance in the Financial CrisisThe recent financial crisis has raised several questions with respect to the corporate governance of financial institutions. This paper investigates whether risk management-related corporate governance mechanisms, such as for example the presence of a chief risk officer (CRO) in a bank's executive board and whether the CRO reports to the CEO or directly to the board of directors, are associated with a better bank performance during the financial crisis of 2007/2008. We measure bank performance by buy-and-hold returns and ROE and we control for standard corporate governance variables such as CEO ownership, board size, and board independence. Most importantly, our results indicate that banks, in which the CRO directly reports to the board of directors and not to the CEO (or other corporate entities), exhibit significantly higher (i.e., less negative) stock returns and ROE during the crisis. In contrast, standard corporate governance variables are mostly insignificantly or even negatively related to the banks' performance during the crisis.Type: journal articleJournal: Journal of Banking and FinanceVolume: 36Issue: 12
Scopus© Citations 575 -
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 -
PublicationGeographical Diversification and Firm Value in the Financial SectorThis paper investigates whether geographic diversification is value-enhancing or value-destroying in the financial services sector, broadly defined. Our dataset comprises approximately 3,579 observations over the period from 1985 to 2004 and covers the entire range of U.S. financial intermediaries - commercial banks, investment banks, insurance companies, asset managers, and financial infrastructure services firms. We use two alternative measures of geographic diversification: (1) a dummy variable whether the firm reports more than one geographic segment and (2) the percentage of sales from non-domestic operations. Our results indicate that geographic diversification is not associated with a significant valuation discount in financial intermediaries. However, when accounting for the firms' main activity-areas, we find evidence of a significant discount associated with geographic diversification in securities firms and a premium in credit intermediaries and insurance companies. All these results are robust after taking into account functional diversification of the firms as well as a potential endogeneity of both functional and geographic diversification.Type: journal articleJournal: Journal of Empirical FinanceVolume: 19Issue: 1
Scopus© Citations 26 -
PublicationProduct Market Competition, Managerial Incentives and Firm ValuationThis paper contributes to the very small empirical literature on the effects of competition on managerial incentive schemes. Based on a theoretical model that incorporates both strategic interaction between firms and a principal agent relationship, we analyze the relationship between product market competition, incentive schemes and firm valuation. The model predicts a nonlinear relationship between the intensity of product market competition and the strength of managerial incentives. We test the implications of our model empirically based on a unique and hand-collected dataset comprising over 600 observations on 200 Swiss firms over the 2002 to 2005 period. Our results suggest that, consistent with the implications of our model, the relation between product market competition and managerial intensive schemes is convex indicating that above a certain level of intensity in product market competition, the marginal effect of competition on the strength of the incentive schemes increases in the level of competition. Moreover, competition is associated with lower firm values. These results are robust to accounting for a potential endogeneity of managerial incentives and firm value in a simultaneous equations framework.Type: journal articleJournal: European Financial ManagementVolume: 17Issue: 2
Scopus© Citations 60 -
PublicationTrust and Success in Venture Capital Financing - An Empirical Analysis with German Survey DataThis paper presents an empirical analysis of the role of trust in the relationship between venture capitalist and entrepreneur. Following the social sciences literature, we try to differentiate between trust as an affective, value-based category from confidence which is understood as a backward-looking, evidence-based mechanism. Using data from a survey among German venture capitalists conducted in 2003, we analyze 111 financing relationships from 75 respondents. We find a significant reciprocal positive relationship between trust and success. Other significant determinants of trust include the perceived quality of the entrepreneur and credibility of information (two proxy variables for measuring confidence), the perceived importance of reputation and the stage of the entrepreneur's venture. The level of monitoring and control is identified as a substitute for trust. We address a potential endogeneity of trust and success by estimating a system of two simultaneous equations by 3SLS and find the results to be robust. Finally, we use data from a second survey conducted in 2006 to assess whether trust predicts success. In fact, our results indicate that a higher level of trust in 2003 is associated with a higher success rate in 2006.Type: journal articleJournal: KyklosVolume: 62Issue: 1
Scopus© Citations 32 -
PublicationThe Performance Persistence of Equity Long/Short Hedge FundsThis paper examines the persistence of raw and risk-adjusted returns for equity long/short hedge funds using the portfolio approach of Hendricks, Patel, and Zeckhauser (1993). Only limited evidence of persistence is found for raw returns. Funds with the highest raw returns last year continue to outperform over the subsequent year, although not significantly, while there is no persistence in returns beyond one year. In contrast, we find performance persistence based on risk-adjusted return measures such as the Sharpe Ratio and in particular an alpha from a multifactor model. Funds with the highest risk-adjusted performance continue to significantly outperform in the following year. The persistence does not last longer than one year except for the worst performers. Funds with significant risk-adjusted returns show less exposure to the market, have high raw returns, and low volatility. These results are robust to adjustments for stale prices and subperiod analysis.Type: journal articleJournal: Journal of derivatives & hedge fundsVolume: 15Issue: 1DOI: 10.1057/jdhf.2008.28
Scopus© Citations 8 -
PublicationOwnership Structure and the Separation of Voting and Cash Flow Rights - Evidence from SwitzerlandThis paper analyzes the relation between a firm's equity capital structure, managerial and outside block ownership, and firm value based on a unique and hand-collected sample of 545 observations on 174 Swiss firms over the period from 2002 to 2005. While previous papers concentrate either on managerial ownership or on blockholdings, which can but need not be managerial, this paper distinguishes between the two and investigates the relative importance of them. This distinction turns out to be important. I find the probability that a firm has a dual-class structure to be positively related to managerial ownership, the ownership of the single largest shareholder, and inside blockholders more generally while negatively related to the ownership of "true" outside blockholders such as listed companies, mutual and pension funds. Moreover, I present strong evidence that the aim of the dual-class structure is to secure the largest shareholder's and, more specifically, inside blockholders' control over the firm. Most importantly, I find evidence that these inside controlling shareholders take advantage of the dual-class structure by extracting private benefits of control.Type: journal articleJournal: Applied Financial EconomicsVolume: 19Issue: 18
Scopus© Citations 6