IDEAS home Printed from https://ideas.repec.org/a/eme/sefpps/v24y2007i3p188-206.html
   My bibliography  Save this article

Control or invest? Understanding the complex interests of managerial ownership

Author

Listed:
  • Shuching Chou
  • Chinshun Wu
  • Anlin Chen

Abstract

Purpose - Conventional studies discuss the effect of managerial ownership on firm performance and have conflicting findings. This paper seeks to find divergent mutual effects existing between managerial ownership and firm performance. Design/methodology/approach - The three-stage-least squares method and simultaneous equation model is adopted to obtain more efficient coefficient estimation. Both firm-year observations and company mean variables are used to capture the structural relation and mutual effects between ownership structure and firm performance. Findings - This paper finds divergent mutual effects existing. In a diffused ownership structure, better firm performance may induce management to hold more stockholding. Management with mid-range of stockholdings has a positive effect on firm performance but not vice versa. For highly concentrated ownership structure, a negative mutual effect exists. Practical implications - These findings provide the investment purpose as an alternative explanation for insiders' stockholding that agrees with investors' risk aversion attitude in practice. For highly concentrated ownership, possible management entrenchment behavior resulting from dominant control power should be carefully considered and monitored to protect minority shareholders. Originality/value - This paper provides new evidence that complicated mutual effects may exist between managerial ownership and firm performance. It offers insights for both investors and researchers in corporate governance.

Suggested Citation

  • Shuching Chou & Chinshun Wu & Anlin Chen, 2007. "Control or invest? Understanding the complex interests of managerial ownership," Studies in Economics and Finance, Emerald Group Publishing, vol. 24(3), pages 188-206, August.
  • Handle: RePEc:eme:sefpps:v:24:y:2007:i:3:p:188-206
    as

    Download full text from publisher

    File URL: http://www.emeraldinsight.com/10.1108/10867370710817383?utm_campaign=RePEc&WT.mc_id=RePEc
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:sefpps:v:24:y:2007:i:3:p:188-206. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: http://www.emeraldinsight.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.