Leverage and the performance of buyouts

In this paper we investigate the effects of debt usage on (risk-adjusted) equity returns in private equity-backed buyout transactions. We use a proprietary data set of more than 700 realized European and North American buyouts acquired between 1990 and 2006 to empirically assess theoretical predictions. Our results show a positive relationship between debt levels and equity returns indicating the return-enhancing effects related to leverage. However, our results also provide evidence that it is possible to ‘over-leverage’ a company, i.e. at very high levels of leverage (debt to total capital of approximately 90%) the increased company default risk outweighs the positive effects related to leverage resulting in decreasing equity returns. On the other side, we find no significant relationship between leverage and risk-adjusted equity returns which implies that the return increase through higher debt ratios comes along with increasing risk. In addition, we show that private equity sponsors successfully conduct debt-equity-arbitrage in times of favorable debt market conditions. This implies that these investors successfully time debt markets.     

Einfluss der Mandatsdauer des Abschlussprüfers auf ergebniszielgr??enorientierte Bilanzpolitik

This study examines whether the length of auditor-client-relationship affects audit quality. It is motivated by recent calls for mandatory auditor rotation in Europe which are based on concerns that a longer auditor tenure reduces audit quality. Earnings management is used as proxy for audit quality. It is measured by the firms’ success to achieve earnings benchmark targets. A situation in which an abnormal high proportion of firms just meet the benchmark and an abnormal low proportion of firms just miss the benchmark is interpreted as earnings management. Analysed benchmark targets are the reporting of small profits (loss avoidance) and the reporting of small positive earnings increases. Multivariate analyses indicate a higher success for benchmark beating with longer auditor tenure. This result suggests that, in the current environment, mandatory limitations on the length of auditor-client-relationship could result in higher audit quality.     

Impact of the psychosocial work environment on registered absence from work: A two-year longitudinal study using the IPAW cohort

During the Intervention Project on Absence and Well-being (IPAW), a 5-year project conducted in Denmark, we investigated psychosocial work environment factors as independent predictors of the number of absence days per year. The present two-year longitudinal study used the IPAW cohort, but was not intended to study intervention effects, which will be reported later. Data were derived from baseline questionnaires and employers' registers of absence for 1919 participants (1305 women, 614 men, mainly in low-skilled jobs) in different occupations from 52 workplaces. These workplaces included municipal care, municipal technical services and a large pharmaceutical company. Analyses were performed by Poisson regression accounting for over-dispersion. After controlling for age, family type, health behaviours and physical work environment variables, we found that high levels of decision authority predicted low absence rates in both women and men. We tested two new psychosocial constructs developed for this study: Predictability (relating to being informed on future events at work) and Meaning of Work (relating to how meaningful and useful the work is perceived to be). Higher Predictability was a significant predictor of lower absence rates in men. This study adds to the body of evidence that the psychosocial working environment influences absence and should therefore be considered to be an important target for intervention.     

Acyclic sets of linear orders via the Bruhat orders

We describe Abello’s acyclic sets of linear orders [SIAM J Discr Math 4(1):1–16, 1991] as the permutations visited by commuting equivalence classes of maximal reduced decompositions. This allows us to strengthen Abello’s structural result: we show that acyclic sets arising from this construction are distributive sublattices of the weak Bruhat order. This, in turn, shows that Abello’s acyclic sets are, in fact, the same as Chameni-Nembua’s distributive covering sublattices (S.T.D.C s). Fishburn’s alternating scheme is shown to be a special case of the Abello/Chameni-Nembua acyclic sets. Any acyclic set that arises in this way can be represented by an arrangement of pseudolines, and we use this representation to derive a simple closed form for the cardinality of the alternating scheme. The higher Bruhat orders prove to be a natural mathematical framework for this approach to the acyclic sets problem. We would like to thank the Editor, Professor Bernard Monjardet, and two anonymous referees for their comments and additional references.     

The authority of complexity*

The assertion about the unique 'complexity' or the peculiarly intricate character of social phenomena has, at least within sociology, a long, venerable and virtually uncontested tradition. At the turn of the last century, classical social theorists, for example, Georg Simmel and Emile Durkheim, made prominent and repeated reference to this attribute of the subject matter of sociology and the degree to which it complicates, even inhibits the develop and application of social scientific knowledge. Our paper explores the origins, the basis and the consequences of this assertion and asks in particular whether the classic complexity assertion still deserves to be invoked in analyses that ask about the production and the utilization of social scientific knowledge in modern society. We present John Maynard Keynes' economic theory and its practical applications as an illustration. We conclude that the practical value of social scientific knowledge is not dependent on a faithful, in the sense of complete, representation of social reality. Instead, social scientific knowledge that wants to optimize its practicality has to attend and attach itself to elements of social situations that can be altered or are actionable.     

Das Erfordernis der Umsatzunabh?ngigkeit und die Konzentration auf dem deutschen Markt f��r Abschlusspr��ferleistungen

The German market for services provided by audit firms is characterised by a growing concentration over the last decades. Due to numerous scandals, an auditor is obliged to meet stricter independence regulations. An audit firm has to reject a client if it received more than 15% of its total income from the listed company to be audited at any time during the last five years and at the same time expects to receive more than 15% in the current period. It can be argued that this regulation accelerates the concentration process, while small and midsize accountants, which serve only a small number of clients, are suppressed. This analysis is based on the data of 442 Prime-Standard audits for the periods 2005, 2006 and 2007. The results show that the Big4-audit firm obtained an increasing market share in terms of clients (77% (2005), 83% (2007)) and total fees (96% (2005), 97% (2007)). Furthermore, it is noticeable, that in particular NonBig4-audit firms exceed the critical threshold of 15% during the periods under investigation. As a result hereof such firms must leave the market after five years. Hence, the German commercial code`s independence regulations may affect the audit market structure. The results suggest that an enhancement of auditor independence through income thresholds is in conflict with a reduction of market concentration. Furthermore, it can be observed that an increase in fees earned from a particular client does not impact auditor independence as long as the income threshold is not exceeded. In addition, internal auditor rotation, auditor engagement by supervisory boards, and the implementation of audit committees could also result in an increase of concentration.     

Imaginative Erkundung der Organisationskultur einer psychiatrischen Tagesklinik

In this contribution a representation of the organizational culture of a psychiatric day-time hospital is developed by analyzing the symbolic meanings of action taken by professionals during their daily work and their relations to other patients.After a short summary of concepts of symbolic action theory as developed by E. E. Boesch in the framework of cultural psychology, these are applied to data from two meetings of professional supervision. The data reports about imaginations and phantasms of individual team members (from individual interviews) as well as findings from a group discussion. The analysis results in hypothetic constructions of the individual phantasms and of the organizational myths, directing their actions.This finally results in ‘value orientations’ expressing the organizational culture which are especially valuable for the purpose of respectful supervision. The author regards the careful consideration of the dynamics between individual phantasms and group myths as being a central task of good practices of supervision, with the aim to develop the action potential of professionals and their patients in such a way that it is well-adapted to both autonomy and cultural frame.     

New venture financing in Germany: Effects of firm and owner characteristics

Entrepreneurial activity by new ventures is an important driver of economic growth. Yet obtaining sufficient and/or appropriate financial means often represents a considerable challenge to entrepreneurs. Notably, reliable empirical evidence on financing patterns of young enterprises in Germany has so far been scarce. Using data from the KfW/ZEW Start-up Panel, a new large-scale dataset of newly founded ventures, we provide a comprehensive overview of financing structures and their firm- and owner-related drivers in German start-ups within the first months of their existence. Conceptually, we find pecking-order theory to hold for new ventures in Germany, although individual motives lead to partially deviant financing patterns. Moreover, our findings indicate that the extent of financing and the choice of capital sources are both driven by a multitude of firm as well as owner characteristics.     

Impact of the psychosocial work environment on registered absence from work: A two-year longitudinal study using the IPAW cohort

During the Intervention Project on Absence and Well-being (IPAW), a 5-year project conducted in Denmark, we investigated psychosocial work environment factors as independent predictors of the number of absence days per year. The present two-year longitudinal study used the IPAW cohort, but was not intended to study intervention effects, which will be reported later. Data were derived from baseline questionnaires and employers’ registers of absence for 1919 participants (1305 women, 614 men, mainly in low-skilled jobs) in different occupations from 52 workplaces. These workplaces included municipal care, municipal technical services and a large pharmaceutical company. Analyses were performed by Poisson regression accounting for over-dispersion. After controlling for age, family type, health behaviours and physical work environment variables, we found that high levels of decision authority predicted low absence rates in both women and men. We tested two new psychosocial constructs developed for this study: Predictability (relating to being informed on future events at work) and Meaning of Work (relating to how meaningful and useful the work is perceived to be). Higher Predictability was a significant predictor of lower absence rates in men. This study adds to the body of evidence that the psychosocial working environment influences absence and should therefore be considered to be an important target for intervention.