Identifying the Effect of Managerial Control on Firm Performance

48 Pages Posted: 8 Nov 2005

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


Using a unique sample, we attempt to identify the consequence of the separation between inside ownership and control for firm performance. We exploit the fact that banking institutions may hold their own shares in trust to construct a clean measure of the wedge between inside voting control and cash flow rights. These shares provide managers with no monetary incentives, since their dividends accrue to trust beneficiaries.

However, managers may have the authority to vote these shares. Contrary to the belief that managerial control is purely detrimental, we find that it has positive effects on performance over at least some range.

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. Journal of Accounting and Economics 41, 55-85, 2006., Available at SSRN: or

Renée B. Adams (Contact Author)

University of Oxford ( email )

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João A. C. Santos

Federal Reserve Bank of New York ( email )

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United States
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212-720-8363 (Fax)


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