Managerial Stock Ownership as a Corporate Control Device: When is Enough, Enough?

40 Pages Posted: 4 Nov 2008

See all articles by A. Sinan Cebenoyan

A. Sinan Cebenoyan

Hofstra University - Frank G. Zarb School of Business; New York University (NYU) - Department of Finance

Elizabeth S. Cooperman

University of Colorado Denver

Charles A. Register

Florida Atlantic University - Department of Economics

Date Written: October 2000

Abstract

It has long been accepted that managerial stock ownership, beyond some range of possible entrenchment, can be an effective means of aligning the interests of professional managers with those of a firm s outside owners to the benefit of firm performance. In this paper, we offerevidence on the effectiveness of managerial stock ownership as a corporate control device by analyzing the behavior of 81 thrift institutions operating over the six-year period, 1989-1994. Based on the estimation of stochastic cost and profit frontiers, as well as other performance measures, our results suggest that managerial stock ownership provides an effective corporate control device. However, this device is only effective as managerial holdings surpass about 33% of outstanding shares for improvements in cost efficiency and about 40% for profit efficiency.

Keywords: Agency Theory, Corporate Governance, Depository Institutions

Suggested Citation

Cebenoyan, Ahmet Sinan and Cooperman, Elizabeth S. and Register, Charles A., Managerial Stock Ownership as a Corporate Control Device: When is Enough, Enough? (October 2000). NYU Working Paper No. FIN-00-043, Available at SSRN: https://ssrn.com/abstract=1295246

Ahmet Sinan Cebenoyan (Contact Author)

Hofstra University - Frank G. Zarb School of Business ( email )

Dept. of Finance
Hempstead, NY 11549
United States
516-463-5702 (Phone)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Elizabeth S. Cooperman

University of Colorado Denver ( email )

Campus Box 165, P.O. Box 173364
Denver, CO 80217
United States
303-315-8422 (Phone)
303-315-8084 (Fax)

Charles A. Register

Florida Atlantic University - Department of Economics ( email )

5353 Parkside Dr
Jupiter, FL 33458
United States
561-297-3000 Ext 73222 (Phone)

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