Identifying the Effect of Managerial Control on Firm Performance

45 Pages Posted: 9 Mar 2002

See all articles by Renee B. Adams

Renee B. Adams

University of Oxford; ABFER

João A. C. Santos

Federal Reserve Bank of New York

Multiple version iconThere are 2 versions of this paper

Date Written: July 16, 2004

Abstract

We attempt to identify the consequence of the separation of inside ownership from control for firm performance. Exploiting the fact that banking institutions may hold their own shares in trust, we construct a clean measure of the wedge between inside voting control and cash flow rights. These shares provide managers with no monetary incentives, since the cash flows accrue to trust beneficiaries. However, managers may have the authority to vote these shares. Using a unique sample of data, we identify a pure effect of managerial voting control on firm performance. Contrary to the belief that managerial control is purely detrimental, we find that it has positive effects.

Keywords: Managerial control, Voting rights, Performance measurement, Trust investments

JEL Classification: G32, G30, G21

Suggested Citation

Adams, Renée B. and Santos, João A. C., Identifying the Effect of Managerial Control on Firm Performance (July 16, 2004). EFA 2002 Berlin Meetings Presented Paper, Available at SSRN: https://ssrn.com/abstract=301873

Renée B. Adams (Contact Author)

University of Oxford ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

ABFER

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Singapore, 117592
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João A. C. Santos

Federal Reserve Bank of New York ( email )

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New York, NY 10045
United States
212-720-5583 (Phone)
212-720-8363 (Fax)

HOME PAGE: HTTP://WWW.NEWYORKFED.ORG/RMAGHOME/ECONOMIST/SANTOS/CONTACT.HTML

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