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Determinants of Managerial Stock Ownership: The Case of CEOs

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  • Bathala, Chenchuramaiah T

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.

Suggested Citation

  • Bathala, Chenchuramaiah T, 1996. "Determinants of Managerial Stock Ownership: The Case of CEOs," The Financial Review, Eastern Finance Association, vol. 31(1), pages 127-147, February.
    • Handle: RePEc:bla:finrev:v:31:y:1996:i:1:p:127-47
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    Cited by:

    1. Marsha Weber & Donna Dudney, 2003. "A Reduced Form Coefficients Analysis of Executive Ownership, Corporate Value, and Executive Compensation," The Financial Review, Eastern Finance Association, vol. 38(3), pages 399-413, August.
    2. Chalevas, Constantinos G., 2011. "The Effect of the Mandatory Adoption of Corporate Governance Mechanisms on Executive Compensation," The International Journal of Accounting, Elsevier, vol. 46(2), pages 138-174, June.
    3. Kyoungwon Mo & Kyung Jin Park & YoungJin Kim, 2019. "The Role of Institutional Investors in the Sustainable CEO Compensation Structure," Sustainability, MDPI, vol. 11(19), pages 1-21, October.
    4. Sun, Ji & Ding, Li & Guo, Jie Michael & Li, Yichen, 2016. "Ownership, capital structure and financing decision: Evidence from the UK," The British Accounting Review, Elsevier, vol. 48(4), pages 448-463.
    5. Khan, Raihan & Dharwadkar, Ravi & Brandes, Pamela, 2005. "Institutional ownership and CEO compensation: a longitudinal examination," Journal of Business Research, Elsevier, vol. 58(8), pages 1078-1088, August.

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