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The Interrelationship Between Managerial Ownership and Board Structure

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  • M. Ameziane Lasfer

Abstract

The paper tests the hypothesis that high managerial ownership entrenches managers by allowing the CEO to create a board that is unlikely to monitor. The results show a strong negative relationship between the level of managerial ownership and corporate governance factors, such as, the split of the roles of the CEO and the Chairman, the proportion of non-executive directors, and the appointment of a non-executive director as a Chairman. I also find that companies with low managerial ownership are more likely to change their board structure to comply with the Cadbury (1992) recommendations. The results suggest that managers, through their high ownership, choose a board that is unlikely to monitor. Overall, the findings cast doubt on the effectiveness of the board as an internal corporate governance mechanism when managerial ownership is high. Copyright 2006 The Author Journal compilation (c) 2006 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Business Finance & Accounting.

Volume (Year): 33 (2006-09)
Issue (Month): 7-8 ()
Pages: 1006-1033

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Handle: RePEc:bla:jbfnac:v:33:y:2006-09:i:7-8:p:1006-1033

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Cited by:
  1. Paul Dunn, 2012. "Breaking the boardroom gender barrier: the human capital of female corporate directors," Journal of Management and Governance, Springer, vol. 16(4), pages 557-570, November.
  2. Khaled Elsayed, 2011. "Board size and corporate performance: the missing role of board leadership structure," Journal of Management and Governance, Springer, vol. 15(3), pages 415-446, August.
  3. Guest, Paul M., 2008. "The determinants of board size and composition: Evidence from the UK," Journal of Corporate Finance, Elsevier, vol. 14(1), pages 51-72, February.
  4. Florackis, Chrisostomos & Kostakis, Alexandros & Ozkan, Aydin, 2009. "Managerial ownership and performance," Journal of Business Research, Elsevier, vol. 62(12), pages 1350-1357, December.
  5. Elsayed, Khaled & Wahba, Hayam, 2013. "Reinvestigating the relationship between ownership structure and inventory management: A corporate governanceperspective," International Journal of Production Economics, Elsevier, vol. 143(1), pages 207-218.
  6. Pietro Marchetti & Valeria Stefanelli, 2009. "Does the compensation level of outside director depend on its personal profile? Some evidence from UK," Journal of Management and Governance, Springer, vol. 13(4), pages 325-354, November.

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