Why are Firms with More Managerial Ownership Worth Less?

Kornelia Fabisik, Ruediger Fahlenbrach, René Stulz and Jérôme P. Taillard

No 25352, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2018-12
New Economics Papers: this item is included in nep-cfn and nep-sbm
Note: CF
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Citations: View citations in EconPapers (3)

Published as Fabisik, Kornelia & Fahlenbrach, Rüdiger & Stulz, René M. & Taillard, Jérôme P., 2021. "Why are firms with more managerial ownership worth less?," Journal of Financial Economics, Elsevier, vol. 140(3), pages 699-725.

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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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