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Incentive Compensation Incentive Compensation, Valuation, and Capital Market Access Helmut Laux / Robert M. Gillenkirch / Matthias M. Schabel In this paper we consider linear sharing rules for incentive compensation, when principal and agent are potentially restricted from short sales. We derive subjective valuation lines for performance shares, based on graphical analyses, and present results with respect to implementing effort and investment incentives. When the agent is restricted from short sales, he may reject an investment with positive market value, and higher performance shares may not induce proper incentives. Relative Performance Evaluation will improve incentives and risk sharing, but there will generally be no clear definition of a suitable benchmark. pp. 335-360 Discussion Discussion of “Incentive Compensation, Valuation, and Capital Market Access” Werner Neus Laux, Gillenkirch, and Schabel (2009) contribute two important ideas to the literature on agency contracting. First, that the standard agency model (one principal, one agent, no capital market) leads to an inevitable conflict between providing incentives and sharing risks. Introducing a capital market where shares in the residual income of a firm are traded leads to an improved risk sharing. However, if the capital market is perfect, then agency contracting becomes irrelevant, because the agent systematically undoes the incentives by choosing a portfolio that implies optimal risk sharing (see below). This result was first presented by Campbell and Kracaw (1985). Therefore, Laux et al. bring in short-selling restrictions, which deter the agent from diluting his incentives. pp. 361-365 Savings Banks The Political Debate about Savings Banks Reinhard H. Schmidt There have been lively political debates about savings banks as long as this type of financial institutions has existed. The focus of these debates have been two of the characteristic features of savings banks: They have always pursued financial as well as non-financial objectives, and until a few years ago and nowadays at least in some countries they are, in a specific sense, public banks. I review the debate about savings banks in two ways. First, I briefly discuss the conventional arguments and present three new arguments for having this type of financial institution. Second, I review the political debate as it has developed on the international level, on the level of the European Union and finally in Germany. I conclude that even though the political debates of the last two decades have led to rather critical assessments of savings banks, both the current financial crisis and recent academic research suggest that this critical position needs to be revised. pp. 366-392 Organizational Capital Measuring Organizational Capital Oliver Ludewig / Dieter Sadowski Firms develop their organizational practices to realize returns from given and marketable resources. Implementing effective practices requires substantial up-front investment. We approximate the economic relevance of establishment-specific organizational capital by using a two-step procedure. First, we extract an establishment-specific performance differential from a within-panel estimator. Second, we explain the variation in this differential by using organizational and control variables. Our results make it possible for us to predict the contribution of organizational practices to the performance differential. We label this part of the firm-specific performance differential “organizational capital”. Our results indicate that organizational capital has a substantial impact on performance. pp. 393-412 Discussion Discussion of “Measuring Organizational Capital” Steffen Brenner / Joachim Schwalbach Ludewig and Sadowski (2009) empirically examine the economic value of organiza-tional capital. They use a comprehensive panel data set from the Institute for Employ-ment Research (IAB) that provides standard information about inputs and outputs of the production process of German corporate establishments. This data set also includes organizational dimensions of those establishments, which makes it an interesting source for a study on organizational capital. pp. 413-415 |
Archiv 2010
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