Considering the shareholder perspective: value-based management systems and stock market performance |
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Authors: | Marc Steffen Rapp Daniel Schellong Maximilian Schmidt Michael Wolff |
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Affiliation: | 1. Center for Entrepreneurial and Financial Studies (CEFS), TUM School of Management, Technische Universit?t München, Munich, Germany 2. Department of Financial Management and Capital Markets, TUM School of Management, Technische Universit?t München, Munich, Germany 3. Department for Corporate Governance, Gutenberg School of Management and Economics (GSME), Johannes Gutenberg-Universit?t Mainz, Mainz, Germany
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Abstract: | We empirically study the use of value-based management systems in listed German firms and examine implications for firms’ stock market performance. Using a novel, hand-collected data set covering 1,083 firm years from 2002 to 2008, we find that value-based management systems become increasingly common. Specifically, in 2008 42% of our sample firms have implemented such a system. In the empirical analysis, we find that firms implementing value-based management systems earn both statistically significant and economically substantial abnormal stock market returns measured within a 2-year adoption phase. These excess returns are not jeopardized by poor post-adoption returns. In the analysis, we carefully control for risk and account for endogeneity concerns. Overall, our findings support the view that shareholders consider the adoption of a value-based management system as a credible signal that management will focus on shareholder interests and that such systems actually increase shareholder value. |
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