IMPACT OF LEASE CAPITALIZATION ON FINANCIAL RATIOS OF LISTED GERMAN COMPANIES
Rolf Uwe Fülbier/Jorge Lirio Silva/Marc Henrik Pferdehirt
The separation of leases into operating and finance leases for accounting purposes can result in incentives to favor operating lease contracts, since they avoid on-balance-sheet debt. The IASB and FASB are conducting a long-term joint project on leasing, following the G4+1 group's research on possible improvements to lease accounting. One alterna-tive is to treat all leases in a manner similar to today's finance leasing. Our simulation results for Germany show notable changes in a variety of financial ratios, especially for assets and liability relations, which may trigger management with incentives to dampen these effects. Of note for standard setters, the effects of operating lease capitalization should not be overstated. Only minor effects can be observed for profitability ratios and market multiples often used for valuation purposes. Moreover, most industries remain almost unaffected and the relative ratio-based ranking of all sample companies does not change much. Additionally, we observe that the common CreditStats® model yields somewhat comparable results.
pp. 122 - 144
Emotions and Compensation
Matthias Kräkel
I introduce a concept of emotions that emerge when workers evaluate their individual performances or when they compare their own performances with those of co-workers. I analyze the interplay of emotions and incentives by focusing on a certain scheme of worker compensation that is frequently used in practice: a piece-rate system. My findings show that standard results of compensation theory significantly change when introducing emotions. I identify certain conditions under which emotions lead to additional incentives and under which the employer benefits from emotional workers, and I sketch the impact of risk aversion on the interplay of emotions and incentives, and the influence of a worker’s success probability on the intensity of his emotions.
pp. 145 - 159
Reassessing the Productivity Impact of Employee Involvement and Financial Incentives
Elke Wolf/Thomas Zwick
Employee involvement and financial incentives are often praised as effective means for increasing firm productivity. We assess the productivity effects of these human resource practices by accounting for the main sources of estimation bias – unobserved heterogeneity and endogeneity – and by using representative establishment panel data for Germany. We show that employee involvement raises establishment productivity, but financial incentive systems do not. An important result is that accounting for unobserved heterogeneity and endogeneity reverses the conclusions on the estimated productivity effects obtained from simple cross-sectional regressions.
pp. 160-181
Should Chairman and CEO be Separated? Leadership Structure and Firm Performance in Switzerland
Markus M. Schmid/Heinz Zimmermann
We investigate the valuation effects of leadership structure in Switzerland where, in contrast to the U.S., a separation of the CEO and chairman functions is common. Consistent with the majority of prior research focusing on the U.S., we find no evidence of a systematic and significant difference in valuation between firms with combined and firms with separated functions. We also investigate whether the leadership structure is related to firm-level corporate governance characteristics. We find a curvilinear relation between leadership structure and managerial shareholdings that is similar to what we observe between firm value and managerial shareholdings. A possible interpretation is that the agency costs associated with a combined function are mitigated by a higher incentive alignment of the CEO/chairman through an adequate level of managerial shareholdings.
pp. 182 - 204
De-Diversification in Germany: Some Critical Remarks on Nicolai and Thomas (2006)
Ingo Weller/Thomas Mellewigt/Carolin Decker
In the article “De-Diversification Activities of German Corporations from 1988 to 2002: Perspectives from Agency and Management Fashion Theory”, published in sbr in January 2006, Nicolai and Thomas offer some interesting hypotheses and empirical analyses on the occurrence of de-diversifications in Germany. We question their results on both theoretical and empirical grounds: the applied operationalization is inadequate in the given context, and is likely to produce flawed findings. We elaborate on our concerns and suggest an alternative measurement approach.
pp. 205 - 210
Reply to Weller, Mellewigt, and Decker
Alexander T. Nicolai/Thomas W. Thomas
In their constructive critique Weller, Mellewigt, and Decker elaborate some concerns on our paper on “De-Diversification Activities of German Corporations from 1988 to 2002: Perspectives from Agency and Management Fashion Theory”. There are three main points: the operationalization of de-diversifications, the application of the Kolmogorov-Smirnov test, and the influence of an outlier in our data. We discuss each of these concerns in turn.
pp. 211 - 212
