Now showing 1 - 10 of 86
  • Publication
    Financial Advice and Retirement Savings
    (SSRN, 2023-01-30)
    Hoechle, Daniel
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    Ruenzi, Stefan
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    Schaub, Nic
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    We 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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  • Publication
    CEO Tenure and Firm Value
    (American Accounting Association, 2021-12) ;
    Brochet, Francois
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    Limbach, Peter
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    Scholz-Daneshgari, Meik
    Our study is the first to provide systematic evidence of a hump-shaped CEO tenure-firm value relation. Cross-sectionally, firm value starts to decline after fewer years of CEO tenure in more dynamic industries, if CEOs are less adaptable to changes, and in the presence of greater labor market frictions. Overall, the dynamics of CEO-firm match quality appear to be a first-order driver of the CEO tenure-firm value association, as explained by CEO characteristics (adaptability), firm/industry characteristics (dynamism), and labor market characteristics that facilitate optimal matching between firms and CEOs.
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  • Publication
    Does Price Fixing Benefit Corporate Managers?
    (INFORMS, 2019-05-13)
    Artiga Gonzalez, Tanja
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    Yermack, David
    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.
    Scopus© Citations 11
  • Publication
    Financial Advice and Bank Profits
    (Oxford University Press, 2018-11)
    Hoechle, Daniel
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    Ruenzi, Stefan
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    Scopus© Citations 28
  • Publication
    The Impact of Financial Advice on Trade Performance and Behavioral Biases
    (Oxford University Press, 2017-03)
    Hoechle, Daniel
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    Ruenzi, Stefan
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    We 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.
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    Scopus© Citations 32
  • Publication
    Is Director Industry Experience Valuable?
    (Financial Management Association, 2016) ;
    Oesch, David
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    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.
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    Scopus© Citations 31
  • Publication
    Firm Structure in Banking and Finance: Is Broader Better?
    (EY Global Financial Services Institute, 2014) ;
    Walter, Ingo
    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.
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  • Publication
    Product Market Competition, Corporate Governance, and Firm Value: Evidence from the EU-Area
    (Wiley-Blackwell Publishing, 2013) ;
    Oesch, David
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    This 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=1771622
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    Scopus© Citations 60
  • Publication
    Hedge fund liquidity and performance : Evidence from the financial crisis
    (Elsevier, 2013-03) ;
    Schaub, Nic
    We 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.
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    Scopus© Citations 26
  • Publication
    Is There Really No Conglomerate Discount?
    (Wiley-Blackwell, 2012-02) ;
    Hoechle, Daniel
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    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.
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    Scopus© Citations 39