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Markus Schmid
Title
Prof. Dr.
Last Name
Schmid
First name
Markus
Email
markus.schmid@unisg.ch
Phone
+41 71 224 7042
Now showing
1 - 10 of 26
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PublicationDoes Price Fixing Benefit Corporate Managers?We study the effects of cartel participation on top corporate managers. Although a strong public interest exists in regulating price fixing, we find little evidence that either corporate governance or the legal system holds managers of cartel firms accountable. Instead, managers of cartel firms enjoy greater job security, receive higher cash bonuses, and extract more ex post compensation through timely exercise of stock options. Legal sanctions against individual managers are infrequent, with enforcement actions focused on corporations rather than their officers. Managers appear to use concealment strategies actively to limit detection of cartel membership by their boards and auditors.Type: journal articleJournal: Management ScienceVolume: 65Issue: 10
Scopus© Citations 10 -
PublicationType: journal articleJournal: Review of Financial StudiesVolume: 31Issue: 11DOI: 10.1093/rfs/hhy046
Scopus© Citations 27 -
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 29 -
PublicationIs Director Industry Experience Valuable?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.
Scopus© Citations 27 -
PublicationFirm Structure in Banking and Finance: Is Broader Better?Economies of scope in financial intermediation continue as a focal point in strategic and regulatory debates. In this paper, we summarize the theoretical research on the value of diversification in financial services firms, and survey the empirical research so far on the conglomerate discount in US and international financial services businesses. We also review research on the internal capital market efficiency in universal banks and financial conglomerates. The paper provides new empirical evidence on the conglomerate discount in US financial intermediaries and how that changes between non-crisis and crisis periods, showing a decline in the discount under turbulent conditions.Type: journal articleJournal: Journal of Financial PerspectivesVolume: 2Issue: 2
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PublicationProduct Market Competition, Corporate Governance, and Firm Value: Evidence from the EU-AreaThis paper investigates whether the valuation effect of corporate governance depends on the degree of competition in the companies' product markets in a large international sample covering 14 countries from the European Union (EU). Besides providing external validity of previous U.S.-centered studies, this paper uses more comprehensive and reliable measures of both product market competition and corporate governance. Consistent with the hypothesis that product market competition acts as a substitute for corporate governance as competitive pressure imposes discipline on managers to maximize firm value, our results show that corporate governance significantly increases firm value in non-competitive industries only. When investigating the channels through which firm value may be increased, we find that good governance for firms in non-competitive industries leads them to have more capital expenditures, spend less on acquisitions and be less likely to diversify. Our results are robust to a large number of robustness checks including the use of alternative measures of competition and governance, as well as using alternative regression specifications. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1771622Type: journal articleJournal: European Financial ManagementVolume: 19Issue: 3
Scopus© Citations 58 -
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 37 -
PublicationFeasible Momentum Strategies in the US Stock MarketWhile there is a large literature documenting the profitability of momentum strategies, their implementation is afflicted with many difficulties. Most importantly, high turnover and costs to hold short positions, especially in small-cap stocks, result in high transaction costs. We restrict our investment universe to large-capitalized stocks included in the S&P 100 index. Moreover, we implement simple investment strategies that invest long in single stocks and short in the stock index. Such simple and cost-saving momentum strategies generate economically high and statistically significant abnormal returns. These results are robust to various risk-adjustments including the CAPM, the Fama French (1993) three-factor model, and a conditional version of the Fama and French (1993) three-factor model. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1694700Type: journal articleJournal: Journal of Asset ManagementVolume: 11Issue: 6DOI: 10.1057/jam.2010.22
Scopus© Citations 9 -
PublicationCorporate Governance and Firm Value: International EvidenceIn this paper, we investigate the relation between firm-level corporate governance and firm value based on a large and previously unused dataset from Governance Metrics International (GMI) comprising 6,663 firm-year observations from 22 developed countries over the period from 2003 to 2007. Based on a set of 64 individual governance attributes we construct two alternative additive corporate governance indices with equal weights attributed to the governance attributes and one index derived from a principal component analysis. For all three indices we find a strong and positive relation between firm-level corporate governance and firm valuation. In addition, we investigate the value relevance of governance attributes that document the companies' social behavior. Regardless of whether these attributes are considered individually or aggregated into indices, and even when "standard" corporate governance attributes are controlled for, they exhibit a positive and significant effect on firm value. Our findings are robust to alternative calculation procedures for the corporate governance indices and to alternative estimation techniques.Type: journal articleJournal: Journal of Empirical FinanceVolume: 18Issue: 1
Scopus© Citations 225 -
PublicationHas Hedge Fund Alpha Disappeared?This paper investigates the alpha generation of the hedge fund industry based on a recent sample compiled from the Lipper/TASS database covering the time period from January 1994 to September 2008. We find a positive average hedge fund alpha in the cross-section for the majority of strategies and a positive and significant alpha for roughly half of all funds. Moreover, the alpha of three-quarter of the strategy indices is positive and significant in the time series. A comparison of a factor model in which the risk factors are selected based on a stepwise regression approach and the widely used factor model proposed by Fung and Hsieh (2004) reveals that the estimated alpha is robust with respect to the choice of the factor model. In contrast to prior research, we find no evidence of a decreasing hedge fund alpha over time. Moreover, based on our sample, we cannot confirm prior evidence pointing to capacity constraints in the hedge fund industry.Type: journal articleJournal: Journal of Investment Management JOIMVolume: 9Issue: 1
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