Literature Review Women on boards and in TMTS and firm performance 85 4 1 Introduction Implementing a suitable management team and monitoring this team closely is one of the most important challenges with regard to personnel is sues for every supervisory board This challenge becomes even more crucial when the business environment is very dynamic as is the case in the renewable energy sector The present case study describes the rise and fall of Germany based CONERGY AG an integrated systems supplier in the field of renewable energies during the years 1998 to 2007 Main reason for CONERGY s distress from which the company failed to recover was overly rapid expansion into international markets and new business sectors within very few years The main responsibility for this excessive company growth lies with CONERGY s founder and Chief Exe cutive Officer CEO Hans Martin Rueter In order to trace and comprehend the CEO s motivation and actions I refer to findings of behavioral finance I show how important insights of behavioral finance such as managerial optimism and overconfidence can provide an explanation for CONERGY s aggres sive expansion strategy I argue that being confi dent and driven by strong optimism Rueter pus hed the company successfully forward in its early stages but eventually fell victim to overconfiden ce He was finally dismissed as CEO at the end of 2007 It appears that the supervisory board failed in its function to effectively monitor and control the CEO s actions The close relationships and mu tual trust between the CEO and some board mem bers may have been detrimental Rueter s uncle and co founder was Chairman of the board his brother a further board member I identify four major effects of Rueter s ambitious expansion strategy which in combination caused CONERGY s severe crisis First the large number of newly founded subsidiaries as well as poorly tar geted acquisitions generated rapidly rising costs particularly personnel costs Second the growing complexity on the organizational level as well as on the technology and product level became hardly manageable Third increasing cash requi rements and weak working capital management caused precarious shortfalls in liquidity nearly re sulting in insolvency Moreover CONERGY failed in procurement It suffered repeatedly from delays in delivery of photovoltaic components leading to re venue losses and did not succeed in securing raw materials at economic costs to profitably operate its large scale production facility in Eastern Ger many The paper is structured as follows In section 4 2 I give an overview of relevant behavioral finan ce literature focusing particularly on the impact of CEO optimism and overconfidence on corporate strategy and development Section 4 3 provides background information regarding structure and development of the German renewable energies sector I show how government subsidies not only paved the way for the emergence of a new in dustry but triggered an unprecedented photovol taics PV boom in Germany Section 4 4 describes data and methodology In section 4 5 I elucidate how managerial overconfidence may have driven excessive growth and investigate how complexi ty within the Group grew with both rapid organic growth and immoderate acquisitions I shed light on capital markets view on the company s expan sion I determine the factors that drove the inor dinate increase of fixed costs cash requirements and working capital and trace the company s pro curement activities over time The aftermath of the crisis and management s attempts to restruc 4 Too close to the sun CEO optimism and overconfidence as drivers for excessive growth The Conergy Case CEO optimism and overconfidence

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