Identifying the Effect of Managerial Control on Firm Performance

45 Pages Posted: 9 Mar 2002  

Renee B. Adams

University of New South Wales, Department of Banking and Finance; ECGI; FIRN; 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, Renee 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 or http://dx.doi.org/10.2139/ssrn.301873

Renée B. Adams (Contact Author)

University of New South Wales, Department of Banking and Finance ( email )

Sydney, NSW 2052
Australia
+61(2)93854280 (Phone)

ECGI

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

FIRN

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

ABFER

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

João A. C. Santos

Federal Reserve Bank of New York ( email )

33 Liberty Street
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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