To illustrate the method, an exact test is developed using sampling methods of a permutation distribution. Simulations examined here indicate that for risk decisions based on only 20 observations per sample, hypothesis tests can be made with substantial confidence. I examine the relationship between ownership structure and value transfers to shareholders. Preliminary results suggest that, consistent with agency theory, firms with higher and more concentrated institutional ownership are more likely to pay dividends. The magnitude of the dividends paid is not monotonic in ownership and depends upon a number of factors.
Institutional ownership is shown to be positively related to firm value.
Institutional and insider ownership appear to have complementary positive relationships with value and each other. The positive relationships exist even after controlling for ownership structure endogeneity. If CEOs are paid as though they can hedge systematic compensation risk, we should expect to find comparatively little relationship between the systematic risk component and the level of expected compensation. However, if CEOs cannot hedge systematic compensation risk, then we should expect to see a similar relationship to that of idiosyncratic risk and compensation levels. Inconsistent with either hypothesis, the results show there is a positive relationship between idiosyncratic risk and compensation level, and a surprisingly stronger positive relationship for systematic risk.