Executive stock ownership and performance tracking faint traces

We examine the relation between managers' financial interests and firm performance. Since the relation could go in either direction, we cast the analysis in a simultaneous equations framework. For firms involved in acquisitions, we find that acquisition performance and Tobin's Q ratios affect the size of managers' stockholdings. We find no evidence, however, that larger stockholdings lead to better performance. Perhaps management is effectively disciplined by competition in product and labor markets. Alternatively, it may not be necessary for top executives to own stock to be residual claimants. And finally, higher ownership might multiply the opportunities to appropriate corporate wealth.

[1]  Clifford G. Holderness,et al.  The role of majority shareholders in publicly held corporations: An exploratory analysis , 1988 .

[2]  Wilbur G. Lewellen,et al.  Merger decisions and executive stock ownership in acquiring firms , 1985 .

[3]  Jensen Mc,et al.  CEO incentives-its not how much you pay, but how. , 1990 .

[4]  D. Mayers,et al.  Managerial vote ownership and shareholder wealth *1: Evidence from employee stock ownership plans , 1992 .

[5]  Richard A. Lambert,et al.  Executive compensation effects of large corporate acquisitions , 1987 .

[6]  W. Mikkelson,et al.  Managers' voting rights and corporate control , 1989 .

[7]  Kenneth J. Martin,et al.  Corporate Performance, Corporate Takeovers, and Management Turnover , 1991 .

[8]  René M. Stulz,et al.  Managerial control of voting rights: Financing policies and the market for corporate control , 1988 .

[9]  E. Fama,et al.  Separation of Ownership and Control , 1983, The Journal of Law and Economics.

[10]  Hamid Mehran,et al.  Executive compensation structure, ownership, and firm performance , 1995 .

[11]  Claudio Loderer,et al.  Corporate bankruptcy and managers' self-serving behavior , 1989 .

[12]  R. Hansen,et al.  A Theory for the Choice of Exchange Medium in Mergers and Acquisitions , 1987 .

[13]  Kenneth J. Martin,et al.  Corporate acquisitions by listed firms: the experience of a comprehensive sample , 1990 .

[14]  H. Manne,et al.  Mergers and the Market for Corporate Control , 1965, Journal of Political Economy.

[15]  Oliver Hart,et al.  Corporate Financial Structure and Managerial Incentives , 1983 .

[16]  Steven B. Perfect,et al.  Alternative constructions of Tobin's q: An empirical comparison , 1994 .

[17]  John Mcconnell,et al.  Additional evidence on equity ownership and corporate value , 1990 .

[18]  S. R. Kole.  Managerial Ownership and Firm Performance: Incentives or Rewards? , 1996 .

[19]  Kenneth J. Martin.  The Method of Payment in Corporate Acquisitions, Investment Opportunities, and Management Ownership , 1996 .

[20]  Y. Amihud,et al.  Corporate Control and the Choice of Investment Financing: The Case of Corporate Acquisitions , 1990 .

[21]  H. Demsetz,et al.  The Structure of Corporate Ownership: Causes and Consequences , 1985, Journal of Political Economy.

[22]  Robert S. Harris,et al.  Means of Payment in Takeovers: Results for the U.K. And U.S , 1987 .

[23]  René M. Stulz,et al.  Managerial discretion and optimal financing policies , 1990 .

[24]  John Joseph McCall,et al.  The Economics of Information and Uncertainty , 1982 .

[25]  A. Shleifer,et al.  Management Ownership and Market Valuation: An Empirical Analysis , 1988 .

[26]  M. Zenner,et al.  How managerial wealth affects the tender offer process , 1994 .

[27]  Anup Agrawal,et al.  Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders , 1995 .

[28]  Nandu J. Nagarajan,et al.  An analysis of the stock price reaction to sudden executive deaths: Implications for the managerial labor market , 1985 .

[29]  R. Jennings,et al.  Stock Price Movements around Acquisition Announcements and Management's Response , 1991 .

[30]  E. Fama.  Agency Problems and the Theory of the Firm , 1980, Journal of Political Economy.

[31]  James A. Brickley,et al.  Ownership structure and voting on antitakeover amendments , 1988 .

[32]  E. Fama,et al.  Agency Problems and Residual Claims , 1983 .

[33]  M. C. Jensen,et al.  The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems , 1993, A Theory of the Firm.

[34]  David J. Denis,et al.  Majority owner-managers and organizational efficiency , 1994 .

[35]  Stephen W. Pruitt,et al.  A Simple Approximation of Tobin's Q , 1994 .

[36]  B. Eckbo,et al.  Asymmetric Information and the Medium of Exchange in Takeovers: Theory and Tests , 1990 .

[37]  M. Porter.  CAPITAL CHOICES: CHANGING THE WAY AMERICA INVESTS IN INDUSTRY , 1992 .

[38]  M. C. Jensen,et al.  Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers , 1999 .