We document a curious feature of the German mutual fund industry. Unlike U.S. mutual funds, funds domiciled in Germany do not necessarily compute their net asset values (NAV) as of market close. Using a sample of German equity funds, we infer each fund's NAV closing time from the best-fit market model using both maximum likelihood and Bayesian estimation. The results of both approaches coincide perfectly and show that all but one of the funds domiciled in Germany report intraday NAVs. We show that using market returns computed at the end of the day instead of the best-fit time, usually leads to misleading inferences about mutual fund performance.
Despite the importance of gathering technological knowledge from external sources, many firms are not well-placed to collect information from beyond their own boundaries. Government policies designed to improve access to technological knowledge often encourage firms to develop strong ties with competitors, suppliers or customers. But although strong ties are valuable, especially when tacit knowledge needs to be communicated, firms in individualistic cultures may resist entering into close relationships with other firms. As a result, policies that encourage such firms to form weak ties may be a more effective way of promoting the spread of technological knowledge in individualistic cultures. In this paper, we develop a set of propositions concerning the suitability of strong and weak ties in cultures that are relatively more individualistic or collectivist. Our arguments are illustrated with survey data from Australia and Finland. In the final section, we make some policy recommendations for improving the diffusion of technological knowledge among firms in individualist cultures.
Die Debatte über Managerlöhne und mögliche Regulierungen hält an. Der Autor schlägt im Folgenden vor, die Entlöhnung relativ zu Gewinn oder Marktwert des Unternehmens zu messen.
Im Zuge der Bankenkrise ist der Ruf nach einer schärferen Regulierung der Managergehälter laut geworden. Der Autor zeigt, dass staatliche Vorschriften in der Vergangenheit kaum je nützten und häufig unerwünschte Nebenwirkungen hatten. Erfolgversprechender wäre, den Aktionären mehr Kontrollrechte in Vergütungsfragen zu geben.
I study the impact of ''say on pay'' (SoP) on the compensation decisions and the structure of the board of directors (BoD) in a setting where the CEO has the real authority over the composition of the BoD. The CEO's authority arises endogenously from an informational advantage about individual board members' contribution to firm value and allows her to establish a dependent BoD. Shareholders approve the CEO's director slate because they can only control the level of board dependence but not the board's contribution to firm value. In this setting, SoP has two effects. On the one hand, it prompts a BoD with a given dependence level to reduce the CEO's bonus. On the other hand, it allows the CEO to extract the rent generated by the improved compensation policy and to establish a more dependent BoD. In equilibrium the board becomes more dependent from the CEO and pays her a higher bonus for the same performance. This outcome can only be avoided if the CEO is restricted in her ability to adjust the board composition. Motivated by existing differences in SoP design, I also analyze the consequences of a binding and a pre-contractual vote. I find that a binding vote creates a moral hazard problem on the part of the firm's shareholders if the vote takes place after the agent has supplied her effort. Its consequences critically depend on the legal protection standard of the CEO. Whenever the shareholders can enforce a retroactive bonus cut, the allowable amount of the bonus reduction determines whether or not SoP improves the efficiency of the pay process or diminishes firm value. I show that the moral hazard problem can be avoided by a pre-contractual vote. If the vote is binding, SoP can improve the efficiency of the compensation arrangement and effectively reduce the equilibrium level of board dependence without impairing the CEO's effort incentives.
