Markus Schmid

Curriculum Vitae

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Ausgewählte Publikationen

An integrated framework of corporate governance and firm valuation

Stefan Beiner, Wolfgang Drobetz, Markus Schmid, Heinz Zimmermann
European Financial Management | 02/2006
Recent empirical research shows evidence of a positive relationship between the quality of firm‐specific corporate governance and firm valuation. Instead of looking at one single corporate governance mechanism in isolation, we construct a broad corporate governance index and apply five additional variables related to ownership structure, board characteristics, and leverage to provide a comprehensive description of firm‐level corporate governance for a representative sample of Swiss firms. To control for potential endogeneity of these six governance mechanisms, we develop a system of simultaneous equations and apply three‐stage least squares (3SLS). Our results support the widespread hypothesis of a positive relationship between corporate governance and firm valuation.

Estimating the cost of executive stock options: Evidence from Switzerland

Wolfgang Drobetz, Pascal Pensa, Markus Schmid
Corporate Governance | 09/2007
It is often argued that Black‐Scholes (1973) values overstate the subjective value of stock options granted to risk‐averse and under‐diversified executives. We construct a “representative” Swiss executive and extend the certainty‐equivalence approach presented by Hall and Murphy (2002) to assess the value‐cost wedge of executive stock options. Even with low coefficients of relative risk aversion, the discount can be above 50 per cent compared to the Black‐Scholes values. Regression analysis reveals that the equilibrium level of executive compensation is explained by economic determinant variables such as firm size and growth opportunities, whereas the pay‐for‐performance sensitivity remains largely unexplained. Firms with larger boards of directors pay higher wages, indicating potentially unresolved agency conflicts. We reject the hypothesis that cross‐sectional differences in the amount of executive pay vanish when risk‐adjusted values are used as the dependent variable.

Industry expert directors

Wolfgang Drobetz, David Oesch, Markus Schmid, Felix von Meyerinck
Journal of Banking and Finance | 07/2018
We analyze the valuation effect of board industry experience and channels through which industry experience of outside directors relates to firm value. Our analysis shows that firms with more experienced outside directors are valued at a premium compared to firms with less experienced outside directors. Additional analyses, including a quasi-experimental setting based on director deaths, mitigate endogeneity concerns. The association between having directors with more industry experience and higher firm value is more pronounced for firms with larger investment programs, larger cash reserves, and during crises. In contrast, it is weaker in more dynamic industries, i.e., industries that rank high in terms of sales growth, R&D expenditures, merger activities, competitive threat, and product market changes, where the value of previously acquired experience is likely to be diminished. Overall, our findings are consistent with board industry experience being a valuable corporate governance mechanism.