Managerial versus Entrepreneurial Firms:
The Benefits of Separating Ownership and Control
Matthias Kräkel
Agency theory emphasizes that separating ownership and control can lead to inefficiencies in corporations, but the literature on strategic delegation points out that the owner will profit from this separation due to advantages from self-commitment. In this paper, both literatures are combined. The results show that strategic delegation can be even more profitable in the presence of agency problems. Furthermore, delegating takeover decisions to managers yields positive welfare effects.
pp. 2-19
Valuation With or Without Personal Income Taxes
Frank Richter
This paper reviews different schools of thought on the question of if and how personal taxes should be incorporated into the valuation of companies or projects. The paper shows under which conditions the risk-neutral valuation approach yields the same result as the Tax-CAPM. Special cases are analyzed that imply irrelevance of personal taxes. In addition, empirical questions are addressed, such as how to determine the expected market rate of return after personal taxes. For this purpose current market prices are used in combination with cash-flow forecasts of financial analysts. Finally, a view is presented on the precision required to estimate the personal tax rate. If both the investment opportunity and its alternative are similarly tax affected, then relative values should not change too much as a function of the tax rate. However, common sensitivity analyses indicate the opposite.
pp. 20-45
Components and Parameters of Corporate Reputation -
an Empirical Study
Manfred Schwaiger
A wide variety of scientific and semi-scientific publications state that (amorphous) constructs like corporate reputation may cause sustainable profits. The reason for their interest in reputation is that increasing competition in a globalized economy promotes the identification of drivers of sustainable competitive advantages in the field of intangible assets, too. Therefore, in this paper we describe the state of the art in defining and measuring corporate reputation. Literature review, theory based conceptualization, and expert interviews allow us to develop and test an item battery, resulting in a new measurement approach. Our results show that fitting a structural model is much easier if we do not follow American literature, where reputation is supposed to be one-dimensional, but instead split corporate reputation into two dimensions, a cognitive component we call competence and an affective one we call sympathy. We show that performance aspects drive competence but dampen sympathy, whereas responsibility items have positive impact on sympathy and negative impact on competence.
pp. 46-71
Joint Ownership and Incomplete Contracts:
The Case of Perfectly Substitutable Investments
Stephanie Rosenkranz/Patrick W. Schmitz
Important results of the property rights approach based on incomplete contracts, as outlined by Hart (1995), say that all ownership structures lead to underinvestment and that joint ownership cannot be optimal, provided that investments are strategic complements and affect human capital only. We show that when only the total amount invested matters, these conclusions are still true in a static setting, even if investments are in physical capital. However, if the parties can invest and generate a surplus twice, then joint ownership may imply first-best investments in the first stage and can well be the optimal ownership structure.
pp. 72-89
