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Ownership Structure as a Signal of Managerial Ability


  • Jacob Gyntelberg

    (Institute of Economics, University of Copenhagen)

  • Søren Kyhl

    (Institute of Economics, University of Copenhagen)


This paper develops a signalling model of an entrepreneur's decision to go public when he continues as a manager. The intrepreneur takes his firm public in order to cash in on his initial investment. Assuming that the entrepreneur can design the ownerhsip structure when going public, we show that the ownership structure can be used to signal the entrepreneur's ability to outside investors. The presence of asymmetric information is shown to have the following consequences: ownership structure will be more concentrated, ex-post the manager will show less initiative in his search for new projects, and the equity value of the company will be higher.

Suggested Citation

  • Jacob Gyntelberg & Søren Kyhl, 1999. "Ownership Structure as a Signal of Managerial Ability," Discussion Papers 99-17, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:9917

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    References listed on IDEAS

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    Cited by:

    1. Waśniewski, Krzysztof, 2010. "Corporate strategies – the institutional approach," MPRA Paper 25190, University Library of Munich, Germany.

    More about this item


    ownership structure; signalling; corporate finance; incomplete contracts;

    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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