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Considering the shareholder perspective: value-based management systems and stock market performance

Marc Steffen Rapp, Daniel A. Schellong, Maximilian Schmidt and Michael Wolff

No 2010-09, CEFS Working Paper Series from Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München

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 that implement value-based management systems earn statistically significant and economically substantial abnormal stock market returns measured within a two-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.

Keywords: value-based management; corporate governance; econometric analysis; Germany (search for similar items in EconPapers)
JEL-codes: G34 G30 G38 (search for similar items in EconPapers)
Date: 2010
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Persistent link: http://EconPapers.repec.org/RePEc:zbw:cefswp:201009

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