Impact of soft law regulation by corporategovernance codes on firm valuation: thecase of Germany

Markus Stiglbauer and Patrick Velte

Markus Stiglbauer is aProfessor and Head ofDepartment at theDepartment of CorporateGovernance, University ofErlangen-Nürnberg,Nuremberg, Germany.Patrick Velte is anAssociate Professor atthe Department ofFinancial Accounting andAuditing, University ofHamburg, Hamburg,Germany.

AbstractPurpose – This paper aims to provide insight whether disclosed compliance with the GermanCorporate Governance Code (GCGC) leads to higher valuation on the German stock market.Design/methodology/approach – Based on agency theory, stakeholder theory and institutionaltheory, the authors conduct a meta-analysis and evaluate the value relevance of the compliance with theGCGC.Findings – The research finds that compliance with the GCGC is mainly not a value-relevant factor forGerman companies listed at the Frankfurt Stock Exchange.Research limitations/implications – The research considered is not fully comparable with regard toobservation date, full integration of the GCGC rules and company selection/sample size. Futureresearch is encouraged to research the valuation effects of compliance with the GCGC for a longer timehorizon, the use of uniform performance measures and the integration of all GCGC rules.Practical implications – Compliance with the GCGC has not proven to be a value-driver for Germanlisted companies. The authors recommend companies to search for opportunities to make theircorporate governance more comprehensive by expanding their corporate governance reporting andthus providing deeper insights on how their processes of management and control work.Originality/value – The paper is the first investigation integrating the results of ten years of “codecompliance – market valuation” research in Germany. We detect reasons why soft law regulation bycorporate governance codes did not function on the German stock market. We additionally addressbehavioral aspects why investors do not give enough relevance to companies’ corporate governancestatements so far.

Keywords Corporate governance, Disclosure, Enforcement, Soft law, Capital market, Firm valuation

Paper type Research paper

1. Introduction

In their current green papers of corporate governance and external audit of 2010 and 2011,the European Commission (EC) plans several reforms to strengthen corporate governancequality in Europe (European Commission, 2010a, 2010b, 2011). In their green paper“corporate governance framework” of 2011, the EC criticizes the low decision usefulness(relevance and reliability) of the corporate governance reporting. To give investors morequalified information concerning the compliance of listed companies with the nationalcorporate governance codes and to build up new trust after the financial market crisis, theEC discusses the future of soft law systems and the implementation of enforcement of thecorporate governance reporting, e.g. by the national exchange supervisory authorities.

Recently, Aguilera and Cuervo-Cazurra (2009) identified corporate governance codes in64 industrial, emerging and developing countries. Also Germany has its German CorporateGovernance Code (GCGC) since 2002, which is evaluated and, if necessary, modulatedyearly. But there is also an increasing demand for good corporate governance, asinstitutional investors gather bigger and more concentrated share proportions (Tricker,2009). Because investors’ decisions depend more and more on corporate governancemetrics (Smith and Walter, 2006), managers of listed companies face pressure to adopt

Received 23 May 2012Revised 30 December 2012Accepted 7 February 2013

DOI 10.1108/CG-05-2012-0043 VOL. 14 NO. 3 2014, pp. 395-406, © Emerald Group Publishing Limited, ISSN 1472-0701 CORPORATE GOVERNANCE PAGE 395

international best practices of good corporate governance (Chang et al., 2006). Thus, toenable capital markets to work efficiently, they might force companies to make theircorporate governance transparent (Schredelseker, 2008). Nevertheless, even in advancedmarket economies, there is [still] a great deal of disagreement on how good or bad theexisting governance mechanisms are (Shleifer and Vishny, 1997, p. 737), and also,empirical findings from and within different countries (Fernández-Rodríguez et al., 2004) donot consistently report good corporate governance (often measured by compliance with acountry-specific corporate governance code) as a factor of companies’ success (Alvesand Mendes, 2004). Insofar, we first analyze the degree of compliance with the GCGCbetween 2003 and 2010 and give a review of empirical studies which measure possiblelinks between compliance with the GCGC and its reporting and firm performance. It is notcertain that even full compliance with the GCGC and its offensive reporting will generallylead to an increased firm performance, because non-enforced soft law standards mightalso implicate lower trust by investors.

2. Theoretical background

With respect to corporate governance aspects, agency theory is for sure the most oftenused approach (Dühnfort et al., 2008). It proposes that adequate monitoring or controlmechanisms need to be established in companies to protect shareholders and otherinvestors (Shleifer and Vishny, 1997). Effectively structured boards, up-to-date accountingpractices and a transparent information policy exemplify internal mechanisms thatencourage active monitoring of managerial decision-making processes (Kiel andNicholson, 2003). The benefits of sound and effective corporate governance mechanismsare expected to outweigh its costs (Parsa et al., 2007). Accordingly, all corporations, bethey large or small, are well-advised to follow and comply with standards of “good”corporate governance formulated in codes of best practice (Bartholomeusz and Tanewski,2006). Code compliance, moreover, can also be considered as means to signal a high levelof corporate governance quality to investors, analysts as well as to the wider public(Stiglbauer, 2010c). Vice versa, it is not surprising that those codes tend to be dominatedby an agency theory perspective (Zattoni and Cuomo, 2010).

Lacking information on management and control of listed companies might lower accuracyof investors’ risk-return ratio (Nöth, 2009) because national and international accountingstandards [German commercial code (“Handelsgesetzbuch”; HGB) and InternationalFinancial Reporting Standards] only allow a limited balance sheet capitalization ofself-provided intangible assets (Lev and Zarowin, 1999), leading to a value gap betweenbalance sheet equity and firm value. However, even institutional investors might find itdifficult to evaluate and interpret companies’ corporate governance quality (Amstutz,2007). Accordingly, reporting on the adoption of rules of specific corporate governancecodes can be a valuable instrument to reduce the asymmetry between internal and externalinformation (Parum, 2005) and lower investors’ uncertainty (Fama and French, 1998). Thus,corporate governance reporting can be classified as an instrument of modern valuereporting by complementing the traditional financial accounting to a broad businessreporting (Weber, 2011). With regard to the principal agent theory (Ross, 1973; Jensen andMeckling, 1976), reducing information asymmetry and signaling corporate governancequality might be an important task for companies to lower their cost of capital and to secureaccess to financial assets (Weber and Velte, 2011). Transparency toward key issues oncorporate governance is assumed to be trust-building on capital markets (DiPiazza andEccles, 2003) but can also be used for impression management and image-building. Suchsignals might also lower agency costs by reducing conflicts of interest and costs formonitoring management and searching for information (Smith and Walter, 2006).Consequently, corporate governance reporting via a standardized corporate governancestatement might support value-based management (Ballwieser, 2009) when companiesare able to increase their attractiveness for investors. International research generallysupports this assumption: capital markets equal non-private, relevant corporate

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governance information with bad information if they are able to evaluate the information oncorrectness and completeness (Milgrom, 1981). Due to missing corporate governanceinformation, investors might be hindered from allocating capital perfectly. As aconsequence, some companies have to pay too much cost of capital, whereas others haveto pay too little. Thus, the compliance statement with the GCGC [§ 161 corporation law(“Aktiengesetz”; AktG)] and the corporate governance statement (§ 289a HGB) play a keyrole for (international) investors to evaluate the corporate governance quality of companiesand analyze value potentials.

Summing up, from an agency-theoretical perspective, on the one hand, corporategovernance reporting on compliance with the GCGC can reduce uncertainty ofshareholders toward a company, lower cost of capital and increase firm performance. Onthe other hand, extensive corporate governance disclosures might not lead to marketefficiency, because investors do not (always) behave like a “homo oeconomicus” and areconfronted with limited rationality with regard to the behavioral financial accountingand might be counteracted by important problems like information overload ormisinterpretations of the disclosure signals of the management. Information integrationtheory generally analyzes if or how information-processing functions among informationreceivers. The valuation of information heavily depends on the perception of information.Therefore, perceived usefulness and trustworthiness of information are important factors ifand how information is integrated in decision processes (Anderson, 1981). Building on thepremise of bounded rationality (March and Simon, 1958), the theory of upper echelonsemphasizes the importance of mental models of decision makers to understand theirchoices (Rost and Osterloh, 2010). Investors are typically confronted with a vast amount ofinformation (Mintzberg, 1973) and they discard information that seems less important tothem (Weick, 1979). This discard of information depends on the interpretation of thesituation, application of their beliefs, knowledge, assumptions and values (Finkelstein andHambrick, 1990).

Shankman (1999) challenges agency theory’s (limited) focus on investors and proposesstakeholder theory as an alternative perspective, where different stakeholder groups arerecognized and considered. On this background, Heath and Norman (2004) urge that thereis a need for reforms in corporate governance mechanisms whereby regulatory codes andrequirements formally consider the interests of non-shareholding stakeholders. However,existing corporate governance regulatory codes usually do not explicitly relate tonon-shareholding stakeholders (Parsa et al., 2007). For instance, although Germancorporate governance is internationally well-known for its employee co-determination andstrong workers’ representation on supervisory boards, problems and aspects connected toit are hardly mentioned in the GCGC.

Few authors recently proposed institutional theory as an adequate approach to examinecode compliance. Hooghiemstra et al. (2008) argue that companies are “isomorphic” as totheir (non)compliance to corporate governance codes as well as the arguments they offerfor non-compliance with the provisions contained in corporate governance codes (Spiraand Page, 2010). The highly institutionalized environment of companies provides “a contextin which individual efforts to deal rationally with uncertainty and constraints often lead, inthe aggregate, to homogeneity in structure, culture, and output” (DiMaggio and Powell,1983, p. 147). By recommending a comprehensive set of norms, corporate governancecodes have become part of this institutional environment in which listed companies operate(Aguilera and Cuervo-Cazurra, 2004; Broberg et al., 2010; Seidl, 2007).

3. Compliance with the GCGC and firm valuation

3.1 Compliance with the GCGC

Since 2002, the Berlin Center of Corporate Governance (BCCG) yearly evaluates Germancompanies’ compliance with the GCGC. Analyzing the existing studies of the BCCG from2003 to 2010, German listed companies have considerably high compliance rates

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concerning the recommendations of the GCGC, which raise moderately over the yearscoming from a high initial rate. Nevertheless, bigger companies normally have highercompliance rates. Furthermore, listed German firms do have lower compliance rates withthe suggestions of the GCGC, which increase moderately over the years, too (Figure 1). Weought to mention the limitations of these studies. There are significant differences on thereturn rate of questionnaires between the different selection indices of the Frankfurt StockExchange. Thus, we would not predict absolute representativity of the BCCG figures forevery selection index and all listed companies at the Frankfurt Stock Exchange. Moreover,the authors themselves assume the existence of a non-response bias for companies witha rather negative attitude toward the GCGC. Further aspects the authors report are differentcompliance rates in different selection indices and also in single sections of the GCGC(Werder and Talaulicar, 2010). Finally, the GCGC is revised nearly every year. Insofar, themain body of the GCGC is always the same, but single rules change over time. Thus,talking about compliance rates does not automatically mean to compare companies bymeans of the same GCGC over the years.

Despite different methodology and different sample size, Graf and Stiglbauer (2008a) and,recently, Jahn et al. (2011) basically confirm the findings of the BCCG, with minordifferences among the small-cap companies (mainly due to lower respondence rates ofthose companies in the BCCG studies). Nevertheless, based on the yearly “official” surveyof the BCCG, the GCGC is supposed to have reached a high overall acceptance rateamong German listed companies, and officials assume that compliance with the GCGC isnot only a factor of companies’ success theoretically but also practically. Thus, companieswith low compliance rates are supposed to suffer a loss in firm value (Cromme, 2005) orhave to pay higher cost of capital to compensate risks. This assumption is generallysupported by international surveys among global investors: corporate governance-specificmechanisms (e.g. implementing corporate governance codices) seem to be as importantas financial figures when considering an investment (Ambachtsheer, 2006).

Figure 1 Compliance rates with the GCGC

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3.2 Compliance with the GCGC and firm performance

In recent time, studies into the correlation between institutions, especially corporategovernance mechanisms, and the valuation of financing instruments have reached almostunmanageable numbers (Stiglbauer, 2010c). In this context, an empirical check isconducted of functional correlations between the quality of corporate governance orindividual valuation criteria on the one hand and firm performance on the other. Thus far, ithas not been possible yet to provide unequivocal evidence by means of internationalcorporate governance research for the assessment, based on the principal agent theorythat “good” corporate governance in otherwise identical circumstances leads to adecrease in the cost of capital (Bassen, 2006). Empirical corporate governance researchhas originated from the US board system, especially with the studies by Gompers et al.(2003); Bebchuk et al. (2004) and Brown and Caylor (2006) tending to be considered asgroundbreaking (Velte, 2009). We proceed with a literature review and find 12 studies forGermany which focus on the impact of compliance with the GCGC on firm performance(Table I). In contrast to the Anglo-American board system, German listed companies mustadopt a two-tier system (management board and supervisory board). Furthermore, thecorporate governance system is more insider-oriented in comparison to the USA because

Table I Studies on the impact of compliance with the GCGC on firm valuation

Study Sample, contents and period Results (impact)

Drobetz et al. (2004) 91 listed companies components of the GCGC andadditional criteria of the so-called GermanAssociation for Financial Analysis and AssetManagement (DVFA)-Scorecard 2002

Positive impact on market to book ratioof equity and total shareholder return

Nowak et al. (2005) 138 companies listed in the Prime Standardsegment of Deutsche Börse Group compliancestatements toward GCGC 2002/03

No short-term impact on share pricedevelopment

Nowak et al. (2006) 317 companies listed at the Frankfurt StockExchange compliance statements toward GCGC2002-05

Neither absolute compliance withGCGC nor an improvement incompliance with GCGC has an impacton share price development

Bassen et al. (2006) 96 companies listed in HDAX index (coveringselection indices DAX, MDAX, TecDAX) allinformation on corporate governance available 2003

No impact on Tobin’s Q and totalshareholder return

Goncharov et al. (2006) 61 companies listed in selection indices DAX andMDAX compliance statements toward GCGC2002/03

No impact on total shareholder return

Bress (2008) 128 companies listed in indices HDAX and SDAXcompliance statements toward GCGC 2003/04

Positive impact on Tobin’s Q; noimpact on total shareholder return

Bassen et al. (2009) 100 companies listed in HDAX index all informationon corporate governance available 2005

Negative impact on Tobin’s Q

Stiglbauer (2010a) 113 companies listed in indices HDAX and SDAX allinformation on corporate governance available2006/07

No impact on market to book ratio ofequity and Tobin’s Q; negative impacton total shareholder return

Stiglbauer (2010b) 25 biggest listed companies of the financial sectorin selection indices DAX, MDAX and SDAX allinformation on corporate governance available2006/07

Weakly positive impact on Tobin’s Qand market to book ratio of equity; noimpact on total shareholder return

Steger and Stiglbauer (2011) 139 small and medium sized entities (SMEs) listedat the Frankfurt Stock Exchange compliancestatements toward GCGC 2006/07

No impact on share price development

Stiglbauer (2011) 21 SMEs of the financial sector listed at theFrankfurt Stock Exchange compliance statementstoward GCGC 2006/07

No impact on share price development

Jahn et al. (2011) 1487 observations of companies once been listed inthe Prime standard segment of Deutsche BörseGroup (exceptionally companies of the financialservices industry) compliance statements towardGCGC 2002-07 and total shareholder return(2001-09)

No impact on total shareholder return

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the rules of investor protection by information externality and enforcement of the firmdisclosures are lower (Weber and Velte, 2011). The following empirical studies from thebusiness years 2002 to 2009 use different proxies for firm performance related to thecapital market which can be divided in two groups:

1. capital market performance measures (share price development, total shareholderreturn); and

2. hybrid performance measures (Tobin’s Q, market to book ratio of equity), which areoften used in other corporate governance studies for the one-tier system, too.

The studies are based on regression analysis to measure links between compliance withthe GCGC and the proxies of firm performance. We find rather mixed results, showing apositive, a negative or no impact of compliance with the GCGC on different measures forfirm performance. Anyhow, despite having problems to compare different studies, whenisolating the predicted impact of corporate governance on cap market performance, wederive to a clear picture. Excluding the study of Drobetz et al. (2004) and in part the resultsfor Tobin’s Q and market to book ratio of equity in the Stiglbauer (2010b) study (which onlycomprises a small sample of the financial sector), by the majority we find no impact (oreven a negative) of companies’ compliance with the GCGC on cap market performance(Figure 2).

3.3 Limitations of the empirical corporate governance studies

There are different reasons why those mixed results might occur. First, beneath differentmodels for estimation, different periods of observation and samples are used. Thus, weassume a sample selection bias when comparing the empirical studies above, “that resultsfrom using non-randomly selected samples to estimate behavioral relationships as anordinary specification bias that arises because of a missing data problem” (Heckman,1979). Furthermore, non-consideration of changes of listing within selection indices oftenconnected with index effects does make single studies which are similar on first sighthardly comparable. Second, only the studies of Bress (2008); Bassen et al. (2006) and

Figure 2 Impact of compliance toward GCGC on cap market performance over time

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Stiglbauer (2010a) test for endogeneity and reverse causation between corporategovernance and performance. Third, single studies use different measures (often only one)for firm performance. Thus, it is hard to generalize findings for one single performancemeasure, e.g. a hybrid one, for other measures like a pure cap market-oriented. Therefore,we generally propose multi-model studies with different performance measures. Fourth,even recently published papers consider data from 2005 and often only use data on theeasier observable recommendations of the GCGC (above studies which only usecompanies’ compliance statements). This seems problematic because these studies donot cover all aspects of the GCGC as an instrument of regulation. This is also problematicbecause the suggestions of the GCGC represent advances in national as well asinternational corporate governance best practices. Therefore, comments on the impact ofcompliance toward the GCGC on performance are not comprehensive. Another aspect tocriticize is the use of further criteria for good corporate governance like in the Drobetz et al.(2004) study. As a consequence, it is hard to evaluate whether the GCGC has a positiveeffect on performance or the additional DVFA criteria (Larcker et al., 2005). Fifth, there aredifferences between the studies considering the integration of both the recommendationsand the suggestions with the overall measure of “compliance with the GCGC”.

Some studies only integrate compliance with the recommendations (Goncharov et al.,2006), whereas other studies integrate both recommendations and suggestions(Stiglbauer, 2010a). Recommendations are marked in the GCGC text by the use of the word“shall”, whereas suggestions are either marked with the word “should” or “can”.Nevertheless, some authors have different numbers of recommendations and suggestionswhich they put together to an overall score for “compliance with the GCGC” (Drobetz et al.,2004 vs Bassen et al., 2006). Despite cursory equality of the measures, some compliancerates are based on different interpretation of the GCGC, as some authors put every “shall”and every “should” or “can” as one single rule, whereas others put some rules together(e.g. when there is a connection in content between them). Sixth, literature gives goodreason that the GCGC does not fit as well for SMEs as for big companies (Steger andStiglbauer, 2011). When developing the GCGC in 2002, the GCGC Commission especiallytook the corporate governance requirements of big companies as an example, and also inthe GCGC Commission, there was only one member from an SME. Natural differences inboard structure and the development of and need for committees within boards as well asdifferences in transparency and reporting between SMEs and big companies (mustautomatically) lead to a higher rate of non-compliance with the GCGC rules among SMEs(Graf and Stiglbauer, 2008b). This might put a further bias on the empirical results reportedabove and its comparison in case of different sample selection.

4. Discussion

Contrary to theoretical assumptions, we don’t consider companies’ declared compliancewith the GCGC as a value driver on the German capital market. There are, however, anumber of reasons why such an impact might not exist. After corporate scandals, despitehigh levels of compliance with the GCGC (e.g. Siemens) and having lost its effect ofnewness, investors seem to distrust high levels of compliance with the GCGC more andmore. Moreover, a gap between declared compliance with the GCGC and real action incompanies may be a negative signal (Stiglbauer, 2010b) for the capital market and beconsidered a synonym for rather symbolic management than a responsible culture of goodcorporate governance (Wade et al., 1997). Investors seem to anticipate impressionmanagement behavior to qualify lower cash flow expected (Goncharov et al., 2006) whencompanies report high compliance rates (Westphal and Zajac, 1998). Accordingly, theassumption of Peltzer (2002) might be correct, that compliance with the GCGC could onlybe used as an instrument of public relations to win investors’ favor, without really changingcorporate governance structures inside the company. Furthermore, companies with badcorporate governance might even be motivated to report higher compliance rates or to usescope of interpretation of the GCGC (Graf and Stiglbauer, 2008a). This assumption is also

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supported by the fact that auditors only have to check whether the declaration ofconformance with the GCGC has been reported. The auditor does not have to check thecontent or gaps between declared compliance and real action inside the companies. As aconsequence, even companies without this gap may suffer from this because analysts domonitor and search for information more intensely than they would do instead. This issupported by the research of Milgrom (1981), who found that investors do consider missinginformation with bad information, when they are able to perceive whether the information isright and complete. In case of the information investors receive from companies’compliance statements, they cannot be sure whether the information is right or complete(no one tests the validity of the statements). Considering information integration and choiceof information out of a vast of information investors have, it is not surprising that investorsmainly discard information on corporate governance derived from companies’ compliancestatements. Thus, the basic process that investors do integrate this specific corporategovernance information in the decision-making process and decide whether to invest ordisinvest in a specific company by terms of companies’ corporate governance frameworkpresented by their compliance statements (Stiglbauer, 2010c) will not be initiated as longas investors are not able to evaluate the accuracy of the companies’ corporate governancestatements (Finkelstein and Hambrick, 1990).

Consequently, the declaration of conformity with the GCGC does not seem to represent theright instrument for listed companies to signal good corporate governance, obviously it islegitimated by German Corporation Law. Therefore, a general further point of discussionamong researchers is whether regulation via corporate governance codices and enforcedcompliance with such codes really mirrors the whole set of good corporate governancewithin a company (Romano, 2004). Again it is arguable whether this “box ticking” approachsolely on compliance with a corporate governance code is able to measure real action andreal managerial behavior within companies (Theisen and Raßhofer, 2007). Notwithstanding,we do not advise companies to generally reject GCGC rules or not to discuss themintensely. Especially companies with higher market to book values should invest in bettercorporate governance, incorporated in national and international standards like the GCGCor the Sarbanes Oxley Act. Quite the contrary, we advise companies to discuss GCGCrules and their firm-specific adoption more critically and reject them when there is goodfirm-specific reason. This has already been reported as a factor of success for Britishcompanies (MacNeil and Li, 2006). Moreover, especially low-rated companies shouldimprove their governance mechanisms to be able to signal good corporate governance.Additionally, the findings presented here might motivate the Commission on the GCGC tointegrate further (stricter) guidelines within the GCGC (containing less scope ofinterpretation), to have new potential ready for listed companies to differentiate from oneanother (Daily et al., 2003). As the GCGC rules are widely accepted and overall compliancerates do not show significant impact on cap market performance, single studies recentlyhave started to research on single recommendations of the GCGC (Bassen et al., 2009).

5. Conclusion

Although the GCGC generally is highly adopted among German listed companies, thisshort survey paper mainly does not state a positive significant link between codecompliance and firm performance. There are huge implications that the corporategovernance reporting does not contribute to a decision of useful business reporting and toimprove the decision behavior of investors so far. The EC also criticizes in its recent greenpaper “Corporate governance framework” of 2011, the limited validity of the compliancewith the national corporate governance codes and their disclosures in view of the soft lawsystem and the missing enforcement of the substantial correctness of the disclosures.

A first step of the European and national standard setter to increase the quality of thecorporate governance reporting was the establishment of a “real” comply or explainprinciple. This might put more trust on and relevance of German companies’ corporate

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governance mechanisms for investors’ decision making instead of simply reporting highcompliance rates, as long as testing “real” compliance is not an integral part of the auditor’swork or any other supervising institution in Germany (Stiglbauer, 2013). Moreover, § 289aHGB now forces corporations to a broaden reporting on corporate governance-specificissues (corporate governance statement), e.g. companies have to describe real actionwithin management and supervisory boards in the two-tier system, the constitutions andself-reflection of those boards and the kind of election within them (Stiglbauer et al., 2012).Nevertheless, in contrast to the USA, there is still only minor possibility and pressure toproof whether companies’ reporting on compliance with the GCGC is correct and there isalso little danger in the German legal system for managers of being personally punished forincorrect compliance statements or consequences for companies concerning listing at theFrankfurt Stock Exchange. Not only due to this fact, it becomes obvious why the Germancorporate governance system is often being characterized as one that secures creditors toa high and investors to a low extent (La Porta et al., 2000). Summarizing, this leaves usrather skeptical whether these changes may raise investors’ attitude toward the GCGC andits soft law rules as a value driver.

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About the authors

Markus Stiglbauer is a Professor for Corporate Governance at the School of Businessand Economics at the University of Erlangen-Nürnberg (FAU), Germany. He holds a PhD inEconomics and Social Sciences and two master’s degrees in Business Administration andEconomics from the School of Business, Economics and Management Information Systemsat the University of Regensburg, Germany. Markus Stiglbauer is the corresponding authorand can be contacted at: markus.stiglbauer@wiso.uni-erlangen.de

Patrick Velte is an Associate Professor for Financial Accounting and Auditing at the Schoolof Business, Economics and Social Sciences at the University of Hamburg, Germany. Heholds a PhD in Economics and Social Sciences and a master’s degree in BusinessAdministration from the School of Business, Economics and Social Sciences at theUniversity of Hamburg, Germany.

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