Managerial ownership dynamics and firm value
By: Rüdiger Fahlenbrach, René M. Stulz.
Contributors: Stulz, René M.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 13202.; Working paper series (National Bureau of Economic Research) -- working paper no. 13202.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 47
Subjects: Stock ownership -- United States -- Econometric models; Executives -- Finance, Personal -- Econometric models
Description: From 1988 to 2003, the average change in managerial ownership is significantly negative every year for American firms. The probability of large decreases in ownership is strongly increasing in contemporaneous and past stock returns but the probability of large increases in ownership through managerial purchases of shares is not. The relation between changes in Tobin's q and past and contemporaneous changes in ownership depends critically on controlling for past stock returns. When controlling for past stock returns, past large decreases in managerial ownership are unrelated to current changes in Tobin's q but there is some evidence that past large increases in managerial ownership are positively related to current changes in Tobin's q. Because managers sell shares when a firm's stock is performing well, large contemporaneous decreases in managerial ownership are associated with increases in Tobin's q. We argue that our evidence is mostly inconsistent with existing theories and propose a managerial discretion theory of ownership consistent with our evidence.
Notes: "June 2007"

Includes bibliographical references (p. 34-35).

Also available in PDF from the NBER world wide web site (www.nber.org).