Managerial ownership and firm performance: an analysis using switching simultaneous-equations models
This paper uses a switching simultaneous-equations model to examine the relation between managerial ownership and firm performance. The model includes a multinomial logit for the firm's choice among three regimes of large-block ownership, which can be argued as the choice among different degrees of controlling-minority structures, and three simultaneous-equations systems of managerial ownership and performance for each ownership regime. The paper argues that the choice of ownership regimes is the firm's endogenous decision as a reflection of the firm-specific organizational and transactional attributes, and hence the impact of managerial ownership on performance varies across firms belonging to different regimes. Empirical results show that family involvement in the management and significant related-party transactions are important factors to determine the firm's choice of ownership regimes. Evidence also indicates that the patterns of the relation between managerial ownership and firm performance, in the sense that the inflection points for the impact of managerial ownership turning from positive to negative, are markedly different across ownership regimes. Interpretations consistent with the endogeneity of managerial ownership are provided.
Volume (Year): 38 (2006)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEC20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEC20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Julio Pindado & Chabela De La Torre, 2004. "Why is ownership endogenous?," Applied Economics Letters, Taylor & Francis Journals, vol. 11(14), pages 901-904.
- Tarun Khanna & Krishna Palepu, 2000. "Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups," Journal of Finance, American Finance Association, vol. 55(2), pages 867-891, 04.
- Berglof, Erik & Perotti, Enrico, 1994. "The governance structure of the Japanese financial keiretsu," Journal of Financial Economics, Elsevier, vol. 36(2), pages 259-284, October.
- Justo Manrique & Kalu Ojah, 2003. "The demand for housing in Spain: an endogenous switching regression analysis," Applied Economics, Taylor & Francis Journals, vol. 35(3), pages 323-336.
- Jensen, Gerald R. & Solberg, Donald P. & Zorn, Thomas S., 1992. "Simultaneous Determination of Insider Ownership, Debt, and Dividend Policies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(02), pages 247-263, June.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
- Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
- Ram Mudambi & Carmela Nicosia, 1998. "Ownership structure and firm performance: evidence from the UK financial services industry," Applied Financial Economics, Taylor & Francis Journals, vol. 8(2), pages 175-180.
- Klaus Gugler & Jurgen Weigand, 2003. "Is ownership really endogenous?," Applied Economics Letters, Taylor & Francis Journals, vol. 10(8), pages 483-486.
- Lucian Arye Bebchuk, 1999. "A Rent-Protection Theory of Corporate Ownership and Control," NBER Working Papers 7203, National Bureau of Economic Research, Inc.
- McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
- Agrawal, Anup & Knoeber, Charles R., 1996. "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(03), pages 377-397, September.
- Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:38:y:2006:i:2:p:161-181. 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: (Michael McNulty)
If references are entirely missing, you can add them using this form.