Managerial Ownership and Company Performance in German Small and Medium- Sized Private Enterprises

Elisabeth Mueller and Spitz-Oener Alexandra
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Spitz-Oener Alexandra: Humboldt University,Berlin, Germany

German Economic Review, 2006, vol. 7, issue 2, 233-247

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.

Keywords: Company performance; managerial ownership; corporate governance; small and medium-sized enterprises (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1111/j.1468-0475.2006.00154.x

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