Why Managers Hold Shares of Their Firm: An Empirical Analysis
Ulf Von Lilienfeld-Toal
Stockholm School of Economics
University of Mannheim - Department of International Finance
We examine the relationship between CEO ownership and stock market performance. Firms in which the CEO voluntarily holds a considerable share of outstanding stocks outperform the market by more than 10 percent p.a. after controlling for traditional risk factors. The effect is most pronounced in firms that are characterized by large managerial discretion of the CEO. The abnormal returns we document are one potential explanation why so many CEOs hold a large fraction of their own company's stocks. We also examine several potential explanations why the existence of an owner CEO is not fully reflected in prices but leads to abnormal returns.
Number of Pages in PDF File: 40
Keywords: CEO-Ownership, Asset Pricing, Large Shareholders
JEL Classification: G12, G30working papers series
Date posted: March 19, 2008
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