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http://ssrn.com/abstract=992919
 
 

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Managerial Ownership Dynamics and Firm Value


Rüdiger Fahlenbrach


Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute

Rene M. Stulz


Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

January 2008

ECGI - Finance Working Paper No. 182/2007
Journal of Financial Economics (JFE), Forthcoming
Ohio State University, Fisher College of Business Working Paper No. 2007-03-013
Charles A. Dice Center Working Paper No. 2007-12

Abstract:     
From 1988 to 2003, the average change in managerial ownership is significantly negative every year for American firms. We find that managers are more likely to significantly decrease their ownership when their firms are performing well and more likely to increase their ownership when their firms become financially constrained. When controlling for past stock returns, we find that large increases in managerial ownership increase q. This result is driven by increases in shares held by officers, while increases in shares held by directors appear unrelated to changes in firm value. There is no evidence that large decreases in ownership have an adverse impact on firm value. We rely on the dynamics of the managerial ownership/firm value relation to mitigate concerns in the literature about the endogeneity of managerial ownership.

Number of Pages in PDF File: 49

Keywords: Firm valuation, director and officer ownership, ownership dynamics

JEL Classification: G30, G32

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Date posted: June 22, 2007 ; Last revised: September 27, 2010

Suggested Citation

Fahlenbrach, Rüdiger and Stulz, Rene M., Managerial Ownership Dynamics and Firm Value (January 2008). ECGI - Finance Working Paper No. 182/2007; Journal of Financial Economics (JFE), Forthcoming; Ohio State University, Fisher College of Business Working Paper No. 2007-03-013; Charles A. Dice Center Working Paper No. 2007-12 . Available at SSRN: http://ssrn.com/abstract=992919 or http://dx.doi.org/10.2139/ssrn.992919

Contact Information

Rüdiger Fahlenbrach
Ecole Polytechnique Fédérale de Lausanne ( email )
Quartier UNIL-Dorigny
Extranef 211
1015 Lausanne, CH-1015
Switzerland
++41-21-693-0098 (Phone)
++41-21-693-3010 (Fax)
HOME PAGE: http://sfi.epfl.ch/fahlenbrach.html
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

Rene M. Stulz (Contact Author)
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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