Why Are Firms With More Managerial Ownership Worth Less?

Kornelia Fabisik, Ruediger Fahlenbrach, René Stulz and Jérôme Taillard
Additional contact information
Kornelia Fabisik: Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute
Jérôme Taillard: Babson College

No 18-75, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Using more than 50,000 firm-years from 1988 to 2015, we show that the empirical relation between a firm’s Tobin’s q and managerial ownership is systematically negative. When we restrict our sample to larger firms as in the prior literature, our findings are consistent with the literature, showing that there is an increasing and concave relation between q and managerial ownership. We show that these seemingly contradictory results are explained by cumulative past performance and liquidity. Better performing firms have more liquid equity, which enables insiders to more easily sell shares after the IPO, and they also have a higher Tobin’s q.

Keywords: Firm valuation; Director and officer ownership; Liquidity; Performance history (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2018-12
New Economics Papers: this item is included in nep-cfn and nep-sbm
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Why are firms with more managerial ownership worth less? (2021)
Working Paper: Why are Firms with More Managerial Ownership Worth Less? (2018)
Working Paper: Why are Firms with More Managerial Ownership Worth Less? (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1875

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