From the Perspective of Research, what is Interesting when Outsiders Manage Family Businesses?
Research on family businesses stresses again and again that - compared to publicly traded companies with widely held stock - family businesses act structurally in a different way. The typical image of a family business is often characterized by the idea that family businesses have a more long-term oriented decision-making horizon, a lower risk tolerance or - due to the strong emotional connection of the owner family to the company - a less conflict-oriented behavior towards different target groups. To what extent these differences also lead family businesses to a different behavior regarding investments and financing is a research focus at the Chair of Finance at the Friedrichshafen Institute of Family Entrepreneurship (FIF).
The research projects at the Chair of Finance also aim to provide new insights regarding the questions
Professor Dr. Juliane Proelss studied business administration at Katholische Universität Eichstaett-Ingolstadt in Ingolstadt, and completed a postgraduate diploma in commerce at Lincoln University, Canterbury, New Zealand. In June 2009 she completed a doctorate at European Business School (EBS) in Oestrich-Winkel. During her doctorate, she worked as research assistant at the PFI Private Finance Institute / EBS Finance Academy in Oestrich-Winkel and was responsible for consulting projects as well as the conception of executive education programs. Furthermore, she gained teaching experience in trainings for the executive education. She was awarded the titles of Chartered Alternative Investment Analyst (CAIA), Certified Financial Planner (CFP), Certified Foundation and Estate Planner (CFEP).
In July 2009 Juliane Proelss joined the Risk Management Department of Santander Consumer Finance, Mönchengladbach, Germany and was responsible for credit analysis and refinancing. In November 2012 Juliane Proelss was appointed professor in business administration specialized in financial management at Trier University of Applied Sciences, Trier, Germany. In January 2015 she joined Concordia University, Montreal as assistant professor in finance. She published several articles in the field of modern financing instruments and corporate finance in renowned journals and books. Juliane Proelss is teaching in BSc and MSc university level as well as in executive education programs.
Professor Dr. Denis Schweizer studied business administration at Johann Wolfgang Goethe-University in Frankfurt/Main. In April 2008 he completed a doctorate at European Business School (EBS) in Oestrich-Winkel, Germany. During his doctorate, he worked as research assistant at the PFI Private Finance Institute / EBS Finance Academy in Oestrich-Winkel and was responsible for the conception of executive education programs. Furthermore, he gained teaching experience as he regularly held trainings in executive education. He was awarded the titles of Financial Risk Manager (FRM) and Certified Financial Planner (CFP).
In August 2008 Denis Schweizer was appointed Assistant Professor of Alternative Investments at WHU – Otto Beisheim School of Management in Vallendar, Germany. He published numerous articles in the field of alternative investments and corporate finance in renowned journals, such Journal of Banking & Finance, Journal of Corporate Finance, Entrepreneurship Theory and Practice, and Journal of Business Ethics and received multiple research awards. His innovative research ideas received competitive research grants from e.g. the Social Sciences and Humanities Research Council (SSHRC) of about $250,000. Denis Schweizer is teaching at all university levels including BSc, MSc, MBA, and PhD-level as well as in executive education programs. His teaching excellence was recognized with four WHU – Otto Beisheim School of Management best teacher awards. From September 2011 until January 2012 he was a visiting scholar at New York University, New York City, USA. In August 2014 he was appointed as Associate Professor at Concordia University John Molson School of Business and received the Manulife Professorship in Financial Planning in August 2015.
Hidden Champions or Black Sheep? Evidence from German Mini-Bonds
This paper presents a first empirical examination of all available German mini-bond offerings between 2010 and 2015. We compare the default probability according to a mini-bond’s initial rating with that implied by credit risk models, and show that rating agencies can create ratings inflation by issuing overly favorable ratings. This creates a “window of opportunity” for lower-quality firms to compete for funding. In this environment, high-quality firms have an incentive to use mini-bond underpricing to signal their quality. Our data highlight that, according to information-based corporate finance theory, higher underpricing is correlated with higher-quality mini-bond issuers and lower early default rates.
Keywords: Credit Risk; Financing Gap, Mini-Bonds, Mittelstand, Rating Inflation, Small Medium Sized Enterprises (SMEs)
JEL Classification: G12, G30, G32
Available at SSRN: http://ssrn.com/abstract=2625224
The Role of Sovereign Wealth Funds as Activist or Passive Fund Managers
Sovereign Wealth Funds (SWF) have attracted a lot media attention with recent investments in publicly listed companies. Repeatedly, concerns have been raised, such as the fear of industrial espionage or geopolitical threats. We analyze whether SWF managers acquire stakes in foreign publicly listed firms 1) to play an active role which would support concerns or 2) passively select investments to increase the portfolio diversification, for instance. We find that SWF target firms are more profitable, pay higher dividends and have a higher financial stability than their industry peers. This is in line with SWF managers passively seeking for further portfolio diversification in foreign public equity markets. We cannot find an improvement in operating or market performance after the engagement of SWF. Overall, our results indicate strong evidence that SWF managers primarily act as passive investors instead of pursuing activism strategies like private equity funds.
Keywords: Sovereign Wealth Fund, Public Pension Fund, Shareholder Activism, Stock Picking, Event Study, Outperformance
JEL Classification: G14, G32, G34, G38
Available at Journal of Asset Management (2015) 0, 1–13. doi:10.1057/jam.2015.16
Intra-Industry Effects of Shareholder Activism in Germany - Is There a Difference between Hedge Fund and Private Equity Investments?
We investigate the valuation effects of industry rivals on German firms targeted by hedge funds and private equity investors. We argue that both types of investors differ from other block holders due to their strong motivation and ability to actively engage and monitor. We find that the announcement of a change in ownership structure generates statistically significant short- and long-term intra-industry effects for rivals to the respective private equity and hedge fund targets. However, these effects differ markedly between hedge fund investments and private equity investments. We conclude that hedge funds are more aggressive than private equity investors in implementing a shareholder orientation.
Keywords: corporate governance, hedge fund, information signaling, intra-industry effects, private equity, rivals, shareholder activism
JEL Classification: G14, G32, G34
Available at Schmalenbach Business Review (sbr), Vol. 63, S. 151-185
Hedge Funds versus Private Equity Funds as Shareholder Activists in Germany – Differences in Value Creation
We investigate the valuation effects of German firms targeted by hedge funds and by private equity investors. We argue that both types of investors differ from other blockholders by their strong motivation and ability to actively engage and reduce agency costs. Consequently, we find positive abnormal returns following a change in ownership structure. However, these effects differ markedly between both investors, as proxy variables for agency costs only explain the market reaction for our private equity subsample. We conclude that private equity funds seem to be more successful at creating shareholder value, which could be due to their longer-term perspective and a higher adaptability to the surrounding corporate governance.
Keywords: Abnormal Returns, Corporate Governance, Hedge Funds, Private Equity, Shareholder Activism
JEL Classification: G14, G32, G34, G38
Available at Journal of Economics and Finance, Vol. 38 (2), S. 181-208