Determinants of Managerial Stock Ownership: The Case of CEOs

Chenchuramaiah T Bathala

The Financial Review, 1996, vol. 31, issue 1, 127-47

Abstract: Research on the determinants of managerial equity ownership in firms is scant. To a limited extent, prior researchers have examined the variations in insider ownership proportions by combining the officers and directors into one group. This paper differs from earlier studies by focusing on the CEO. The evidence suggests that agency costs, free cash flow, and potential non-diversification losses and CEO attributes are important in explaining variations in CEOs' equity propositions in firms. Specifically, the paper finds that the proportion of CEO's ownership is related positively to the firm's debt level, diversification potential of the firm's common stock, free cash flows, and earnings volatility, and related negatively to the firm size. Copyright 1996 by MIT Press.

Date: 1996
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