Essays on empirical corporate governance [Elektronische Ressource] / Christoph Schneider

Christoph Schneider


Essays on Empirical Corporate Governance





Inauguraldissertation
zur Erlangung des akademischen Grades
eines Doktors der Wirtschaftswissenschaften
der Universität Mannheim.

Vorgelegt im Frühjahrssemester 2009
1









Dekan: Professor Dr. Hans H. Bauer
Referent: Professor Ernst Maug, Ph.D.
Korreferent: Professor Dr. Holger Daske
Tag der Disputation: 05. Oktober 2009
1Contents
I Introduction .................................................................................................. 8
1 Overview ....................................................................................................................... 8
2 Corporate governance 9
3 Outline of the thesis.................................................................................................... 15
II Bankers on the Boards of German Firms: What they do, what they are
worth, and why they are (still) there ............................................................... 19
1 Introduction ................................................................................................................ 19
2 Literature review and hypothesis development....................................................... 23
2.1 Bankers provide capital markets expertise........................................................... 23
2.2 Bankers monitor non-financial firms ................................................................... 24
2.3 Bankers promote their own business.................................................................... 26
2.4 Evidence from other studies................................................................................. 27
3 Institutional framework, data and methods ............................................................ 29
3.1 Institutional framework........................................................................................29
3.2 Construction of the data set.................................................................................. 31
3.3 Ties between banks and non-financial firms........................................................ 32
3.4 Performance measures and additional variables .................................................. 35
3.5 Methods................................................................................................................37
4 When do banks get involved?.................................................................................... 39
5 What do bankers on the board do? .......................................................................... 43
5.1 Bankers on boards as capital markets experts? .................................................... 43
5.2 Bankers on boards as sales agents?...................................................................... 46
5.3 Bankers on boards as monitors?........................................................................... 50
6 The value of having a banker on the board ............................................................. 52
7 Assessment of the hypotheses: Putting it all together ............................................. 54
8 Conclusions ................................................................................................................. 56
9 Tables........................................................................................................................... 58
III How Preussag Became TUI: A Clinical Study of Institutional
Blockholders and Restructuring in Europe.................................................... 73
1 Introduction ................................................................................................................ 73
2 Background and stock price history......................................................................... 77
22.1 History of Preussag .............................................................................................. 77
2.2 Preussag’s main shareholder: WestLB................................................................. 77
2.3 Phase 1: Consolidate core businesses (1994-1997).............................................. 78
2.4 Phase 2: Enter tourism (1997-2001)..................................................................... 79
2.5 Phase 3: Consolidate tourism (2001-2004) .......................................................... 81
3 Data and methods....................................................................................................... 83
3.1 Data......................................................................................................................83
3.2 Methods................................................................................................................84
3.3 Choice of benchmarks.......................................................................................... 85
3.4 Regression approach............................................................................................86
3.5 Event study ...........................................................................................87
4 Analysis and evaluation ............................................................................................. 88
4.1 Phase 1: Consolidate core businesses (1994-1997).............................................. 88
4.2 Phase 2: Enter tourism, exit core businesses (1997-2001)................................... 89
4.3 Phase 3: Consolidate tourism (2001-2004) .......................................................... 94
4.4 Overall assessment...............................................................................................96
5 Why things went wrong – the larger context........................................................... 98
5.1 The agenda of Preussag’s management ............................................................... 98
5.2 The role of analysts and the press ...................................................................... 100
5.3 Executive compensation and private benefits .................................................... 101
5.4 Ownership and control: The role of WestLB ..................................................... 104
5.5 Conflicts of interest ............................................................................................ 108
6 Reaction by Preussag’s management ..................................................................... 111
7 Conclusion................................................................................................................. 112
8 Tables......................................................................................................................... 115
9 Figures....................................................................................................................... 127
IV Defensive Mergers and Acquisitions................................................... 134
1 Introduction .............................................................................................................. 134
2 Hypotheses ................................................................................................................ 141
3 Data set...................................................................................................................... 147
4 Empirical results ...................................................................................................... 153
4.1 Probability of being acquired and firm size ....................................................... 153
4.2 Profitability of acquisitions................................................................................157
4.3 Acquisition activity and firm size ...................................................................... 161
4.4 Defensive acquisitions and abnormal announcement returns ............................ 163
35 Conclusions ............................................................................................................... 168
6 Tables......................................................................................................................... 169
V Stealth Trading by Corporate Insiders .................................................. 181
1 Introduction .............................................................................................................. 181
2 Institutional framework and data........................................................................... 184
2.1 Institutional framework......................................................................................184
2.2 Construction of the data set................................................................................ 185
3 Definition and existence of stealth trading............................................................. 186
4 Who undertakes stealth trading and when?.......................................................... 189
4.1 The price-impact hypothesis .............................................................................. 190
4.2 The information-content hypothesis...................................................................196
5 Stealth trading and regulation 202
6 The profitability of stealth trades ........................................................................... 205
7 bility of mimicking tra