Managerial Ownership and Firms' Information Environment

49 Pages Posted: 11 Sep 2008

See all articles by Sam Han

Sam Han

Korea University Business School

Tony Kang

University of Nebraska - Lincoln

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business

Date Written: September 10, 2008

Abstract

We examine the relation between managerial stock ownership and the firm's information environment. We focus on three dimensions of the information environment: total, public, and private information precisions (Barron, Kim, Lim and Stevens 1998). Our results suggest that firms' total and public information precisions are positively related to managerial ownership. In contrast, there is no clear pattern in private information precision across different levels of managerial ownership. We also observe that managerial ownership has a greater impact on the firm's public information environment after the implementation of Regulation Fair Disclosure, suggesting that the regulation was more effective in terms of improving the firms' public information flow for firms whose managers' interests are better aligned. Collectively, our findings suggest that one of the possible channels through which managerial ownership associates with earnings informativeness and firm value is the firms' public information precision and that managerial incentive alignment plays an important role in how managers respond to a new disclosure regulation.

Keywords: Managerial ownership, Information environment, Interest alignment

JEL Classification: M40, M41, O16

Suggested Citation

Han, Sam and Kang, Tony and Lobo, Gerald J., Managerial Ownership and Firms' Information Environment (September 10, 2008). Available at SSRN: https://ssrn.com/abstract=1266354 or http://dx.doi.org/10.2139/ssrn.1266354

Sam Han

Korea University Business School ( email )

Anam-Dong 5 Ga, Seongbuk-Gu
Seoul, 136-701
Korea, Republic of (South Korea)
+82-2-3290-2839 (Phone)

Tony Kang (Contact Author)

University of Nebraska - Lincoln ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States
713-743-4838 (Phone)
713-743-4828 (Fax)

HOME PAGE: http://www.bauer.uh.edu/acct/acctprofile.asp?search=Gerald%20Lobo

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