Three Essays on Age and Firm Performance

Old captains at the helm: Chairman age and firm performance Urs Waelchli and Jonas Zeller December, 2012 This paper examines whether the chairmen of the board (COBs) impose their life-cycles on the firms over which they preside. Using a large sample of unlisted firms we find a robust negative relation between COB age and firm performance. COBs age much like ‘ordinary’ people. Their cognitive abilities deteriorate and they experience significant shifts in motivation. Deteriorating cognitive abilities are the main driver of the performance effect that we observe. The results imply that succession planning problems in unlisted firms are real. Mandatory retirement age clauses cannot solve these problems. Corporate Aging around the World Jonas Zeller January, 2014 This paper examines whether firms internationally age as US firms do (Loderer, Stulz, and Wälchli, 2013). Using a large panel, I find that Tobin’s Q monotonically falls with firm Age across all nineteen countries in the sample. The decrease varies across countries but is generally extremely robust and economically significant. ROA, sales growth, and market share decrease over a firm’s lifetime in most countries as well. Furthermore, older firms reduce their capital expenditures and R&D outlays. Instead, they distribute more cash to their shareholders. Overall, the results suggest that corporate aging is not confined to the US but is a genuine phenomenon that affects listed firms worldwide. This evidence supports the hypothesis that corporate aging is driven by managers who optimally focus on managing their assets in place and neglect the development of growth opportunities. I finally ask whether the managers’ choice and with it the magnitude of the decline in Tobin’s Q is a function of country-level institutional settings. I find that most notably firms age faster in countries where employees are relatively well protected by labor regulation. Is employment protection the fountain of corporate youth? Claudio Loderer, Urs Wälchli, Jonas Zeller* September 2014 Acharya, Baghai, and Subramanian (2012, 2013) find that employment protection legislation (EPL) encourages innovation. We argue that this effect should be particularly strong in mature firms. We would therefore also expect EPL to boost growth opportunities. Using the natural Experiment created by the staggered passage of changes in EPL across seventeen countries, we find evidence that employment protection legislation does indeed stimulate Innovation efforts, especially in mature firms. The effect is stronger in countries in which patents are owned by the firm and in the context of regular contracts. Consistent with that, EPL encourages risk taking. Overall, however, there is Little evidence that the effect of EPL on innovation effort translates into higher firm value, not even in mature firms. EPL does motivate employees in those firms to put in a greater effort, as evidenced by stronger sales growth. Yet it also increases costs, reduces profitability, and depresses Tobin’s Q ratios in all firms, especially the mature ones, possibly because of the rigidities that characterize these firms [Loderer, Stulz, and Waelchli (2014)].

Old captains at the helm: chairman age and firm performance

This paper examines whether the chairmen of the boards (COBs) impose their life cycles on the firms over which they preside. Using a large sample of unlisted firms, we find a robust negative relation between COB age and firm performance. COBs age much like ‘ordinary’ people. Their cognitive abilities deteriorate, and they experience significant shifts in motivation. Deteriorating cognitive abilities are the main driver of the performance effect that we observe. The results imply that succession planning problems in unlisted firms are real. Mandatory retirement age clauses cannot solve these problems.

Target difficulty, intra-year target revisions and firm performance: evidence from business units' targets

Target difficulty is often argued to increase performance. While this association is well established in experimental research, empirical evidence in field research is rather mixed. We attempt to explain this inconsistency by analyzing the importance of intra-year target revisions, which are especially prevalent in real-world field settings. Using survey and archival data from 97 firms, we find that firms with more challenging business unit targets revise targets more often, in line with asymmetric, downward target revisions. Results further show that the degree to which targets are revised during a period results in negative effects on firm performance, as the anticipation of revision negatively affects the business unit management’s performance incentives. Additionally, we find that using targets predominantly for either decision-making or control influences the overall performance effects of target revisions. Our findings may partially explain the mixed field study evidence regarding the effects of target difficulty.

Firm-level strategic orientation and performance: a synthesis and extension of the knowledge base on entrepreneurial, market and learning orientation

Should a firm stay focused or should it rather adopt a broader strategic perspective? This dissertation summarizes and extends the existing knowledge base on entrepreneurial, market, and learning orientation. Building on multiple theoretical perspectives, empirical evidence from prior studies, as well as on survey and archival data collected in two economic contexts, performance effects from individual orientations, their dimensions and combinations are explored. Results reveal that the three strategic orientations are highly interrelated and that their relationship to firm performance is more complex than previously assumed.

Crisis Coming Home? Firm Performance During the Economic Crisis and Managers‘ Work-Family Conflict

The economic crisis over the past years has challenged managers in many ways. In our longitudinal study during the global recession, we examine how perceived firm performance interacts with sources of supervisor support and stress to affect managers’ work-family conflict. First, we draw from Conservation of Resources theory to analyze how sources of supervisor support and stress relate to managers’ work-family conflict. Second, we explore how perceived firm performance modifies the relationships between these factors and work-family conflict. Our surveys of 182 managers before and during the crisis reveal that perceived firm performance significantly alters the effectiveness of sources of supervisor support in relieving work-family conflict. Additionally, perceived poor firm performance was found to intensify the negative effect of stressors on work-family conflict. Our results highlight the need to consider an organization’s perceived health when studying managers’ attitudes and career outcomes.

Socioemotional Wealth, Ambidexterity, and Family Firm Performance: An Empirical Study

While family business literature agrees that family firms are driven by both non-economic and financial motives, it is unclear how the prioritization of socioemotional wealth (SEW) over financial considerations affects family firms' financial performance. Based on a sample of 343 family firm owners from German-speaking Europe, this study reveals a significant and positive relationship between the firm owners' SEW considerations and their family businesses' financial performance. This relationship, in turn, is found to be mediated by organizational ambidexterity. A fine-grained analysis of the different SEW dimensions indicates that this pattern may be driven by two elements of socioemotional wealth only (family members' identification with the firm and emotional attachment). Our findings demonstrate that business families do not necessarily face a trade-off when prioritizing the preservation of their SEW over stabilizing or improving the financial performance of their business. The study enriches several streams of literature and opens up numerous avenues for future research.

The Performance of Swiss and German Family Firms: Investigating Strategies, Orientations and SEW as Determinants

In this chapter we center our attention on the performance drivers of family firms in Switzerland and Germany and compare the corresponding results with the findings generated in the US. Investigating family firms is justified as this organizational form not only constitutes the majority of all firms globally (Sharma and Carney, 2012), but in particular in Switzerland and Germany. In fact, more than 88 percent of all firms in Switzerland are defined as family firms (Frey, Halter, Klein, and Zellweger, 2004), and numbers for Germany are similar (Klein, 2000). While more than 99 percent of all companies in Switzerland are small and medium-sized (Frey et al., 2004), the share of family firms varies with firm size; more specifically, the share of family firms decreases with increasing firm size, which is in line with findings from Germany (Klein, 2000). The social and economic impact of family firms is remarkable. In Germany for instance, family controlled firms provide 60 percent of all jobs and account for 51 percent of the total sales of the German economy (cf. www.familienunternehmen.de). Even though the interest of both academics and practitioners in family firms has been rising significantly in recent years, the existing body of knowledge in the field is still rather fragmented (Sharma, 2004; Sharma and Carney, 2012).

Feeding mastitis milk to organic dairy calves: effect on health and performance during suckling and on udder health at first calving

BackgroundInfection pathways of S. aureus udder infections in heifers are still not well understood. One hypothesis is that calves become infected with S. aureus via feeding mastitis milk. Especially on small-scale farms, pasteurisers are not economic. The purpose of this randomised comparative study was to investigate the influence of feeding milk containing S. aureus genotype B (SAGTB) on the health and development of calves and udder health of the respective heifers. Additionally, a method reducing the bacterial load to obtain safer feeding milk was tested. Thirty-four calves were fed mastitis milk from cows with subclinical SAGTB mastitis. One group was fed untreated milk (UMG). For the other group, milk was thermised at 61°C for one minute (heat treated milk group¿=¿HMG). After weaning, calves were followed up until first calving. A milk sample of these heifers was taken at first milking to compare udder health of both groups.ResultsThermisation of milk led to an effective reduction of S. aureus in the feeding milk. 78% of the analysed pools were free of S. aureus, a reduction of at least one log was obtained in the other pools.Quarter milk samples revealed that two heifers had a S. aureus intramammary infection, but caused by a genotype different from genotype B.During the suckling period, the UMG had a significantly higher incidence rate of 1.09 diarrhoea cases per 100 calf days at risk compared to 0.26 cases per 100 calf days in the HMG (p¿<¿0.05).ConclusionsUnder the conditions of this study, no effects of feeding milk containing SAGTB on udder health after first calving were observed. But a power analysis indicated that the sample size in the current setup is insufficient to allow for assessment on mastitis risk after SAGTB exposition, as a minimal number of 4 calves infected (vs. 0 in the HMG) would have shown significant effects. High bacterial load, however, was associated with an increased incidence rate of diarrhoea. Thus, thermisation as a minimal preventive measure before feeding mastitis milk to calves might be beneficial for maintaining calf health.