Managerial Ownership in a Private Firm Framework

26 Pages Posted: 6 May 2022

See all articles by Chao Gao

Chao Gao

Australian National University, RSFAS

Mitchell Johnston

University of Dayton

Date Written: May 2, 2022


We empirically study the relation between managerial ownership and firm performance in a unique private firm setting. The simplicity of the ownership structure and nature of our sample firms helps isolate the incentive-aligning effect of managerial ownership from the influence of other effects. We find that managerial ownership is positively associated with firm performance. This positive association is concave but not reversed as ownership increases, indicating a diminishing effect of ownership on performance. We use managerial effort and a change of corporate policy to further mitigate the endogeneity concerns. Our findings support managerial ownership as an effective incentive-aligning tool.

Keywords: Managerial Ownership, Firm Performance, Private Firms

JEL Classification: G30, G32

Suggested Citation

Gao, Chao and Johnston, Mitchell, Managerial Ownership in a Private Firm Framework (May 2, 2022). Available at SSRN: or

Chao Gao

Australian National University, RSFAS ( email )

CBE Building
26C Kingsley Street
Acton, 2601

Mitchell Johnston (Contact Author)

University of Dayton ( email )

300 College Park
Dayton, OH 45469
United States

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