DP13089 Discrimination, Managers, and Firm Performance: Evidence from "Aryanizations" in Nazi Germany*

Author(s): Kilian Huber, Volker Lindenthal, Fabian Waldinger
Publication Date: July 2018
Keyword(s): "Aryanizations", discrimination, firms, Managers, Nazi Germany
JEL(s): G30, J7, J71, N24, N34, N8
Programme Areas: Labour Economics, Financial Economics, Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13089

We study whether antisemitic discrimination in Nazi Germany had economic effects. Specifically, we investigate how the forced removal of Jewish managers affected large German firms. We collect new data from historical sources on the characteristics of senior managers, stock prices, dividends, and returns on assets for firms listed on the Berlin Stock Exchange. After the removal of the Jewish managers, the senior managers at affected firms had fewer university degrees, less experience, and fewer connections to other firms. The loss of Jewish managers significantly and persistently reduced the stock prices of affected firms for at least 10 years after the Nazis came to power. We find particularly strong reductions for firms where the removal of the Jewish managers led to large decreases in managerial connections to other firms and in the number of university-educated managers. Dividend payments and returns on assets also declined. A back-of-the-envelope calculation suggests that the aggregate market valuation of firms listed in Berlin fell by 1.78 percent of German GNP. These findings imply that discrimination can lead to significant economic losses and that individual managers can be key to the success of firms.