Managerial ownership and company performance in German small and medium-sized private enterprises

Abstract

We analyse the relationship between managerial ownership and company performance, testing the incentive and entrenchment hypothesis. Differently from previous literature, we focus on small and medium-sized private enterprises which constitute an important part of the German economy. We use a panel of 356 companies in the German business-related service sector for the years 1997-2000. Our findings are that performance, measured by survey-based profit information, is increasing in managerial ownership by up to around 40 per cent. We do not find a significant entrenchment effect, possibly because, at levels at which managers could become entrenched, they already bear a large proportion of the costs and have therefore an incentive to maximize company value.

Cite article

Mueller, E. & Spitz-Oener, A. (2006): Managerial ownership and company performance in German small and medium-sized private enterprises. In: German economic review, Vol. 7, No. 2, p. 233-247. DOI:10.1111/j.1468-0475.2006.00154.x