Executive Stock Ownership and Performance: Tracking Faint Traces

Posted: 17 May 1998

See all articles by Kenneth J. Martin

Kenneth J. Martin

New Mexico State University - Department of Finance & Business Law

Claudio F. Loderer

University of Berne - Institute for Financial Management; European Corporate Governance Institute (ECGI)

Abstract

We examine the relation between managers' financial interests and firm performance. Since the relation could go in either direction, we cast the analysis in a simultaneous-equations framework. For firms involved in acquisitions, we find that acquisition performance and Tobin's Q ratios affect the size of managers' stockholdings. We find no evidence, however, that larger managerial stockholdings lead to better performance. One possible reason is that managers with an equity stake in the firm may have the incentives but not the decision authority to affect performance. Alternatively, management is effectively disciplined by competition in product and labor markets. And finally, it may not be necessary for top executives to own stock to be residual claimants.

JEL Classification: G32, G34, D23, D74

Suggested Citation

Martin, Kenneth J. and Loderer, Claudio F., Executive Stock Ownership and Performance: Tracking Faint Traces. Available at SSRN: https://ssrn.com/abstract=6691

Kenneth J. Martin

New Mexico State University - Department of Finance & Business Law ( email )

College of Business Administration & Economics
Las Cruces, NM 88003
United States
505-646-3201 (Phone)
505-646-2820 (Fax)

Claudio F. Loderer (Contact Author)

University of Berne - Institute for Financial Management ( email )

Engehaldenstrasse 4
Bern, CH-3012
Switzerland
+41 31 631 37 75 (Phone)
+41 31 631 84 21 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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