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Ownership Structure as a Signal of Managerial Ability


Author Info

  • Jacob Gyntelberg

    (Institute of Economics, University of Copenhagen)

  • Søren Kyhl

    (Institute of Economics, University of Copenhagen)


This paper develops a signalling model of an entrepreneur's decision to go public when he continues as a manager. The intrepreneur takes his firm public in order to cash in on his initial investment. Assuming that the entrepreneur can design the ownerhsip structure when going public, we show that the ownership structure can be used to signal the entrepreneur's ability to outside investors. The presence of asymmetric information is shown to have the following consequences: ownership structure will be more concentrated, ex-post the manager will show less initiative in his search for new projects, and the equity value of the company will be higher.

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 99-17.

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Length: 32 pages
Date of creation: Jul 1999
Date of revision:
Handle: RePEc:kud:kuiedp:9917

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Related research

Keywords: ownership structure; signalling; corporate finance; incomplete contracts;

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Cited by:
  1. Waśniewski, Krzysztof, 2010. "Corporate strategies – the institutional approach," MPRA Paper 25190, University Library of Munich, Germany.


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