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Managerial Ownership and Firm Performance in Listed Danish Firms:: In Search of the Missing Link

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  • Rose, Caspar

Abstract

Conventional wisdom argues that managerial ownership may alleviate agency costs due to the separation of ownership and control. The reason is that a higher ownership stake by insiders may help to align the interests of management and shareholders, since management, to a larger extent, becomes a residual claimant. The existing evidence very often relies on data where dispersed ownership combined with a common law tradition are key institutional ingredients. However, it does not provide clear support for the hypothesis that increased managerial ownership improves firm performance. This study contributes to the search for the missing link using a sample in which the institutional framework differs from the Anglo-American system. Specifically, the article conducts a cross-sectional regression analysis of a sample of listed Danish firms testing whether increased managerial ownership is associated with superior firm financial performance measured by Tobin's q. The results reveal that the hypothesis must be rejected. Instead, using three stage least squares analysis shows that increased firm performance results in a higher managerial ownership stake.

Suggested Citation

  • Rose, Caspar, 2005. "Managerial Ownership and Firm Performance in Listed Danish Firms:: In Search of the Missing Link," European Management Journal, Elsevier, vol. 23(5), pages 542-553, October.
    • Handle: RePEc:eee:eurman:v:23:y:2005:i:5:p:542-553
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    Citations

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    Cited by:

    1. Oleksandr Talavera & Charlie Weir & Lin Xiong, 2017. "Time Allocation and Performance: The Case of Chinese Entrepreneurs," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 24(1), pages 27-51, January.
    2. Elena Merino & Montserrat Manzaneque & Yolanda Ramírez, 2019. "Value-added distribution to stakeholder of Spanish listed companies: a corporate governance perspective," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 23(3), pages 577-604, September.
    3. Manzaneque, Montserrat & Merino, Elena & Priego, Alba María, 2016. "The role of institutional shareholders as owners and directors and the financial distress likelihood. Evidence from a concentrated ownership context," European Management Journal, Elsevier, vol. 34(4), pages 439-451.
    4. Afzalur Rashid, 2015. "Revisiting Agency Theory: Evidence of Board Independence and Agency Cost from Bangladesh," Journal of Business Ethics, Springer, vol. 130(1), pages 181-198, August.
    5. Mohammed Arkan Sahib Tileal & Farzaneh Nassirzadeh & Mohammad Javad Saei & Davood Askarany, 2023. "The Impact of Ownership Type on Labour Cost Stickiness," JRFM, MDPI, vol. 16(5), pages 1-17, May.
    6. Acero Fraile, Isabel & Alcalde Fradejas, Nuria, 2014. "Ownership structure and board composition in a high ownership concentration context," European Management Journal, Elsevier, vol. 32(4), pages 646-657.

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