Long-run performance of initial public offerings: The evidence for Switzerland

We estimate the underpricing and long-run performance of Swiss initial public offerings (IPOs) from 1983 to 2000. The average market adjusted initial return is 34.97%. To examine the long-run performance of Swiss IPOs, we compute buy-and-hold abnormal returns, skewness-adjusted wealth ratios, and cumulative abnormal returns using 120 months of secondary market returns. In contrast to previous findings for the U.S. and Germany, we do not find strong evidence for a distinct IPO effect. We attribute long-run underperformance to the fact that IPO firms tend to be small firms. It virtually vanishes when we use a small capitalization index as a benchmark. In spite of distinct economic implications and statistical properties, our basic results are similar for all performance measures applied.

Managing Knowledge Transfer in Software-Maintenance Outsourcing Transitions: A System-Dynamics Perspective

The existing literature suggests that transitions in software-maintenance offshore outsourcing projects are prone to knowledge transfer blockades, i.e. situations in which the activities that would yield effective knowledge transfer do not occur, and that client management involvement is central to overcome them. However, the theoretical understanding of the knowledge transfer blockade is limited, and the reactive management behavior reported in case studies suggests that practitioners may frequently be astonished by the dynamics that may give rise to the blockade. Drawing on recent research from offshore sourcing and reference theories, this study proposes a system dynamics framework that may explain why knowledge transfer blockades emerge and how and why client management can overcome the blockade. The results suggest that blockades may emerge from a vicious circle of weak learning due to cognitive overload of vendor staff and resulting negative ability attributions that result in reduced helping behavior and thus aggravate cognitive load. Client management may avoid these vicious circles by selecting vendor staff with strong prior related experience. Longer phases of coexistence of vendor staff and subject matter experts and high formal and clan controls may also mitigate vicious circles.

Essays on behavioral aspects of the design and disclosure of compensation contracts

This thesis consists of four essays on the design and disclosure of compensation contracts. Essays 1, 2 and 3 focus on behavioral aspects of mandatory compensation disclosure rules and of contract negotiations in agency relationships. The three experimental studies develop psychology- based theory and present results that deviate from standard economic predictions. Furthermore, the results of Essay 1 and 2 also have implications for firms’ discretion in how to communicate their top management’s incentives to the capital market. Essay 4 analyzes the role of fairness perceptions for the evaluation of executive compensation. For this purpose, two surveys targeting representative eligible voters as well as investment professionals were conducted. Essay 1 investigates the role of the detailed ‘Compensation Discussion and Analysis’, which is part of the Security and Exchange Commission’s 2006 regulation, on investors’ evaluations of executive performance. Compensation disclosure complying with this regulation clarifies the relationship between realized reported compensation and the underlying performance measures and their target achievement levels. The experimental findings suggest that the salient presentation of executives’ incentives inherent in the ‘Compensation Discussion and Analysis’ makes investors’ performance evaluations less outcome dependent. Therefore, investors’ judgment and investment decisions might be less affected by noisy environmental factors that drive financial performance. The results also suggest that fairness perceptions of compensation contracts are essential for investors’ performance evaluations in that more transparent disclosure increases the perceived fairness of compensation and the performance evaluation of managers who are not responsible for a bad financial performance. These results have important practical implications as firms might choose to communicate their top management’s incentive compensation more transparently in order to benefit from less volatile expectations about their future performance. Similar to the first experiment, the experiment described in Essay 2 addresses the question of more transparent compensation disclosure. However, other than the first experiment, the second experiment does not analyze the effect of a more salient presentation of contract information but the informational effect of contract information itself. For this purpose, the experiment tests two conditions in which the assessment of the compensation contracts’ incentive compatibility, which determines executive effort, is either possible or not. On the one hand, the results suggest that the quality of investors’ expectations about executive effort is improved, but on the other hand investors might over-adjust their prior expectations about executive effort if being confronted with an unexpected financial performance and under-adjust if the financial performance confirms their prior expectations. Therefore, in the experiment, more transparent compensation disclosure does not lead to more correct overall judgments of executive effort and to even lower processing quality of outcome information. These results add to the literature on disclosure which predominantly advocates more transparency. The findings of the experiment however, identify decreased information processing quality as a relevant disclosure cost category. Firms might therefore carefully evaluate the additional costs and benefits of more transparent compensation disclosure. Together with the results from the experiment in Essay 1, the two experiments on compensation disclosure imply that firms should rather focus on their discretion how to present their compensation disclosure to benefit from investors’ improved fairness perceptions and their spill-over on performance evaluation. Essay 3 studies the behavioral effects of contextual factors in recruitment processes that do not affect the employer’s or the applicant’s bargaining power from a standard economic perspective. In particular, the experiment studies two common characteristics of recruitment processes: Pre-contractual competition among job applicants and job applicants’ non-binding effort announcements as they might be made during job interviews. Despite the standard economic irrelevance of these factors, the experiment develops theory regarding the behavioral effects on employees’ subsequent effort provision and the employers’ contract design choices. The experimental findings largely support the predictions. More specifically, the results suggest that firms can benefit from increased effort and, therefore, may generate higher profits. Further, firms may seize a larger share of the employment relationship’s profit by highlighting the competitive aspects of the recruitment process and by requiring applicants to make announcements about their future effort. Finally, Essay 4 studies the role of fairness perceptions for the public evaluation of executive compensation. Although economic criteria for the design of incentive compensation generally do not make restrictive recommendations with regard to the amount of compensation, fairness perceptions might be relevant from the perspective of firms and standard setters. This is because behavioral theory has identified fairness as an important determinant of individuals’ judgment and decisions. However, although fairness concerns about executive compensation are often stated in the popular media and even in the literature, evidence on the meaning of fairness in the context of executive compensation is scarce and ambiguous. In order to inform practitioners and standard setters whether fairness concerns are exclusive to non-professionals or relevant for investment professionals as well, the two surveys presented in Essay 4 aim to find commonalities in the opinions of representative eligible voters and investments professionals. The results suggest that fairness is an important criterion for both groups. Especially, exposure to risk in the form of the variable compensation share is an important criterion shared by both groups. The higher the assumed variable share, the higher is the compensation amount to be perceived as fair. However, to a large extent, opinions on executive compensation depend on personality characteristics, and to some extent, investment professionals’ perceptions deviate systematically from those of non-professionals. The findings imply that firms might benefit from emphasizing the riskiness of their managers’ variable pay components and, therefore, the findings are also in line with those of Essay 1.

The influence of formal and informal sales controls on customer-directed selling behaviors and sales unit effectiveness

Adaptive selling (AS) and customer-oriented selling (COS) constitute two key customer-directed selling behaviors for the success of the modern sales force. However, knowledge regarding the organizational factors that can induce salespeople to engage in those behaviors is strikingly limited. Against this background, we develop a comprehensive model that delineates the influences of formal and informal sales controls on AS and COS and, through them, on sales unit effectiveness. Based on a sample of sales managers in a major European Union country, we present new evidence that (a) formal and informal sales controls exert differential impact on salespeople's AS and COS behaviors; (b) AS directly and positively influences sales unit effectiveness; (c) COS affects sales unit effectiveness only indirectly, i.e. by fostering AS; and (d) outcome and cultural controls directly improve sales unit effectiveness. We conclude with a discussion of our findings for academics and practitioners.

Hand in hand: public endorsement of climate change mitigation and adaptation

This research investigated how an individual’s endorsements of mitigation and adaptation relate to each other, and how well each of these can be accounted for by relevant social psychological factors. Based on survey data from two European convenience samples (N = 616 / 309) we found that public endorsements of mitigation and adaptation are strongly associated: Someone who is willing to reduce greenhouse gas emissions (mitigation) is also willing to prepare for climate change impacts (adaptation). Moreover, people endorsed the two response strategies for similar reasons: People who believe that climate change is real and dangerous, who have positive attitudes about protecting the environment and the climate, and who perceive climate change as a risk, are willing to respond to climate change. Furthermore, distinguishing between (spatially) proximal and distant risk perceptions suggested that the idea of portraying climate change as a proximal (i.e., local) threat might indeed be effective in promoting personal actions. However, to gain endorsement of broader societal initiatives such as policy support, it seems advisable to turn to the distant risks of climate change. The notion that “localising” climate change might not be the panacea for engaging people in this domain is discussed in regard to previous theory and research.

Inseparable, incapable, or invisible: Why public organizations award no-bid contracts

No-bid contracting is a highly prevalent practice in public procurement of technology services. Alt-hough no-bid contracting is a substantial problem since it reduces competition and welfare, the litera-ture lacks theoretical explanations and empirical tests for why public organizations award no-bid con-tracts. In this paper, we propose three theoretical explanations for no-bid contracting, drawing on transaction cost economics, organizational learning, and institutional theory. We also present how we test these explanations using a comprehensive sample of public procurement transactions. We expect to contribute theoretical explanations for no-bid contracting and practical implications for policy-makers.

Public Governance durch Open Government: Zwei sich ergaenzende Ansaetze fuer die staatliche Aufgabenerfuellung der Zukunft

Waehrend zu Public Governance eine breite wissenschaftliche Debatte existiert und die Analyse staatlicher Aufgabeerfuellung davon profitiert, so steht die praxisnahe Umsetzung weniger im Zentrum der wissenschaftlichen Betrachtungen. Open Government hingegen entwickelt sich als relevante Praktikerbewegung ohne in die wissenschaftliche Diskussion eingeflossen zu sein. Dieser Artikel verbindet die beiden bislang unabhaengig voneinander existierenden Ansaetze und zeigt den Mehrwert von Open Government zur Umsetzung von Public Governance auf.

Value Creation in Family Firms: A Model of Fit

We propose a framework describing how family ownership can create or destroy value depending on the goals, resources, and governance of the family firm, which are each influenced by the family owners. Taking a contingency perspective, we suggest that a fit is required for all three elements – family- influenced goals, resources, and governance – for the family firm to flourish over generations. We conclude with a suggested research agenda indicating research opportunities at the nexus of these identified elements. Further we provide some guiding questions for practitioners that might stimulate fruitful discussions among family firm owners and managers about how to realize ‘‘fit.’’

Human Capital and New Venture Performance: The Moderating Role of Social Relations

With whom should entrepreneurs create their firms in order to enhance nascent venture performance? Conventional wisdom suggests that the stronger human capital and social relations in nascent venture teams are, the better the nascent venture’s performance. We draw from social embeddedness literature, however, and argue that the positive effect of team members’ human capital on three different dimensions of nascent venture performance is weaker when team members exhibit strong social relations. Our analysis of 488 nascent venture teams in the PSED II dataset confirms our predictions, showing that nascent ventures of teams with strong human capital but weaker social relations exhibit the best performance. The study thus offers valuable contributions particularly to literature on entrepreneurial teams the determinants of new venture performance.