Mergers, executive risk reduction and stockholder wealth

Among the possible consequences of agency problems between owners and managers is a tendency by managers to make investment decisions for their firms that are deliberately aimed at reducing firm risk, as a means to control managers' personal wealth risk. The literature has suggested that such behavior may occur to the detriment of shareholder wealth, and that mrgers may be a particular class of investment decisions for which the behavior would be observable. We test these hypotheses empirically, but find no evidence from our merger sample that risk reduction for the aqquiring firm is the typical outcome nor that, when it occurs, it is differentially costly for shareholders.

What Makes a Family Firm Innovative? CEO Risk-Taking Propensity and the Organizational Context of Family Firms

Investigating the new product portfolio innovativeness of family firms connects two important topics that have recently received considerable attention in innovation and family firm research. First, new product portfolio innovativeness has been identified as a critical determinant of firm performance. Second, research on family firms has focused on the questions of if and why family firms are more or less innovative than other organizational forms. Research investigating the innovativeness of family firms has often applied a risk-oriented perspective by identifying socioemotional wealth (SEW) as the main reference that determines firm behavior. Thus, prior research has mainly focused on the organizational context to predict innovation-related family firm behavior and neglected the impact of preferences and the behavior of the chief executive officer (CEO), which have both been shown to affect firm outcomes. Hence, this study aims to extend the previous research by introducing the CEO's disposition to organizational context variables to explain the new product portfolio innovativeness of small and medium-sized family firms. Specifically, this study explores how the organizational context (i.e., ownership by top management team [TMT] family members and generation in charge of the family firm) of family firms interacts with CEO risk-taking propensity to affect new product portfolio innovativeness. Using a sample of 114 German CEOs of small and medium-sized family firms operating in manufacturing industries, the results show that CEO risk-taking propensity has a positive effect on new product portfolio innovativeness. Moreover, the analyses show that the organizational context of family firms impacts the relationship between CEO risk-taking propensity and new product portfolio innovativeness. Specifically, the relationship between CEO risk-taking propensity and new product portfolio innovativeness is weaker if levels of ownership by TMT family members are high (high SEW). Additionally, the effect of CEO risk-taking propensity on new product portfolio innovativeness is stronger in family firms at earlier generational stages (high SEW). This result suggests that if SEW is a strong reference, family firm-specific characteristics can affect individual dispositions and, in turn, the behaviors of executives. Therefore, this study helps extend the knowledge on the determinants of new product portfolio innovativeness of family firms by considering an individual CEO preference and the organizational context variables of family firms simultaneously.

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)].

Human 3β-hydroxysteroid dehydrogenase deficiency seems to affect fertility but may not harbor a tumor risk: lesson from an experiment of nature.

CONTEXT 3β-hydroxysteroid dehydrogenase deficiency (3βHSD) is a rare disorder of sexual development and steroidogenesis. There are two isozymes of 3βHSD, HSD3B1 and HSD3B2. Human mutations are known for the HSD3B2 gene which is expressed in the gonads and the adrenals. Little is known about testis histology, fertility and malignancy risk. OBJECTIVE To describe the molecular genetics, the steroid biochemistry, the (immuno-)histochemistry and the clinical implications of a loss-of-function HSD3B2 mutation. METHODS Biochemical, genetic and immunohistochemical investigations on human biomaterials. RESULTS A 46,XY boy presented at birth with severe undervirilization of the external genitalia. Steroid profiling showed low steroid production for mineralocorticoids, glucocorticoids and sex steroids with typical precursor metabolites for HSD3B2 deficiency. The genetic analysis of the HSD3B2 gene revealed a homozygous c.687del27 deletion. At pubertal age, he showed some virilization of the external genitalia and some sex steroid metabolites appeared likely through conversion of precursors secreted by the testis and converted by unaffected HSD3B1 in peripheral tissues. However, he also developed enlarged breasts through production of estrogens in the periphery. Testis histology in late puberty revealed primarily a Sertoli-cell-only pattern and only few tubules with arrested spermatogenesis, presence of few Leydig cells in stroma, but no neoplastic changes. CONCLUSIONS The testis with HSD3B2 deficiency due to the c.687del27 deletion does not express the defective protein. This patient is unlikely to be fertile and his risk for gonadal malignancy is low. Further studies are needed to obtain firm knowledge on malignancy risk for gonads harboring defects of androgen biosynthesis.

[Evaluation of risk factors for Mastitis-Metritis-Agalactia in pig farms in Switzerland].

Mastitis-Metritis-Agalactia (MMA), also known as postpartum dysgalactia syndrome (PPDS) is the most important disease complex in sows after birth. The present study compared 30 MMA problem herds (over 12% of farrowing sows affected) with 30 control farms (less than 10% of farrowing sows affected) to identify risk factors and treatment incidence. Important risk factors identified were in gilts the integration into the herd after the first farrowing, in gestating sows firm fecal consistency as well as in lactating sows soiled troughs, a low flow rate (<2 liters per minute) in drinking nipples and a high prevalence of lameness. The treatment incidence was also significantly different between the two groups. The MMA prevalence could be reduced through optimization of husbandry, feeding and management, which could essentially diminish the use of antibiotics.