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Adjustments in managerial ownership and changes in firm value

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  • Chen, Ming-Yuan

Abstract

This paper investigates the relation between adjustments in managerial ownership and changes in firm value from two perspectives. First, we examine whether moving toward the optimal level is an important concern for managers when they adjust their ownership. Second, we analyze the effect of changes in managerial ownership on changes in Tobin's q by focusing on how the market reacts differently between the adjustments toward optimal ownership and other discretionary adjustments. Using panel data of non-financial companies listed on the Taiwan Stock Exchange, we find evidence to show that managers significantly increase their ownership when there are below-optimal deviations, whereas reductions in ownership for above-optimal deviations are not significant. Empirical results also show that the market reacts positively to changes in ownership for removing deviations on either side of the optimal level. Discretionary increases or decreases in managerial ownership are detrimental to firm value. Our findings are robust to using different measures of changes in managerial ownership and to certain modifications in the empirical model.

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  • Chen, Ming-Yuan, 2013. "Adjustments in managerial ownership and changes in firm value," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 1-12.
    • Handle: RePEc:eee:reveco:v:25:y:2013:i:c:p:1-12
    DOI: 10.1016/j.iref.2012.04.008
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    2. Ao Yang & Wenqi Li & Brian Sheng Xian Teo & Jaizah Othman, 2022. "The Impact of Financial Derivatives on the Enterprise Value of Chinese Listed Companies: Moderating Effects of Managerial Characteristics," IJFS, MDPI, vol. 11(1), pages 1-18, December.
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    4. Ben Said Hatem, 2017. "How Can We Increase Shareholder' Wealth? An Empirical Validation from European Countries," Business and Economic Research, Macrothink Institute, vol. 7(1), pages 323-335, June.
    5. Tolossa Fufa Gulema & Zhou Xiaoyan, 2021. "Mediating Role of Innovation Capacity in the Relationship between Corporate governance and Firm Performance: evidence from Chinese listed firms," International Journal of Science and Business, IJSAB International, vol. 5(4), pages 105-122.

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    More about this item

    Keywords

    Managerial ownership; Ownership adjustments; Firm value;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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