Abstract

http://ssrn.com/abstract=423510
 
 

References (69)



 
 

Citations (82)



 


 



Structural Models and Endogeneity in Corporate Finance: The Link Between Managerial Ownership and Corporate Performance


Jeffrey L. Coles


David Eccles School of Business, University of Utah; Arizona State University (ASU) - Finance Department

Michael L. Lemmon


University of Utah - Department of Finance

Felix Meschke


University of Kansas - Finance Area

April 14, 2011

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
This paper presents a parsimonious, structural model that isolates primary economic determinants of the level and dispersion of managerial ownership, firm scale, and performance and the empirical associations among them. In particular, variation across firms and through time of estimated productivity parameters for physical assets and managerial input and corresponding variation in optimal compensation contract and firm size combine to deliver the well-known hump-shaped relation between Tobin's Q and managerial ownership. To assess the effectiveness of standard econometric approaches to the endogeneity problem, we apply those remedies to panel data generated from the model. The unfortunate conclusion is that, at least in the ownership-performance context, proxy variables, fixed effects, and instrumental variables do not generally provide reliable solutions to simultaneity bias.

Note: Previously titled "Structural Models and Endogeneity in Corporate FinanceStructural Models and Endogeneity in Corporate Finance: The Link Between Managerial Ownership and Corporate Performance"

Number of Pages in PDF File: 60

Keywords: Corporate governance, Managerial ownership, Executive compensation, Corporate performance, Structural model, Endogeneity

JEL Classification: G32, G34, L20

Accepted Paper Series


Download This Paper

Date posted: July 18, 2003 ; Last revised: April 17, 2011

Suggested Citation

Coles, Jeffrey L. and Lemmon, Michael L. and Meschke, Felix, Structural Models and Endogeneity in Corporate Finance: The Link Between Managerial Ownership and Corporate Performance (April 14, 2011). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=423510 or http://dx.doi.org/10.2139/ssrn.423510

Contact Information

Jeffrey L. Coles
David Eccles School of Business, University of Utah ( email )
David Eccles School of Business
Salt Lake City, UT 84112
United States
801-587-9093 (Phone)
Arizona State University (ASU) - Finance Department ( email )
W. P. Carey School of Business
P.O. Box 873906
Tempe, AZ 85287-3906
United States
480-965-4475 (Phone)
480-965-8539 (Fax)
Michael L. Lemmon
University of Utah - Department of Finance ( email )
David Eccles School of Business
Salt Lake City, UT 84112
United States
801-585-5210 (Phone)
801-581-7214 (Fax)
Felix Meschke (Contact Author)
University of Kansas - Finance Area ( email )
1300 Sunnyside Avenue
Lawrence, KS
United States
(347) 433-5495 (Phone)
HOME PAGE: http://www.business.ku.edu/faculty/meschke-felix/
Feedback to SSRN


Paper statistics
Abstract Views: 8,275
Downloads: 3,053
Download Rank: 1,609
References:  69
Citations:  82

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.469 seconds