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

Elisabeth Mueller and Alexandra Spitz‐Oener

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

Abstract: 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.

Date: 2006
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