Why Are Firms with More Managerial Ownership Worth Less?

Why Are Firms with More Managerial Ownership Worth Less?

Kornelia Fabisik, Ruediger Fahlenbrach, René Stulz, Jérôme Taillard

Series number :

Serial Number: 

Date posted :

December 20 2018

Last revised :

December 20 2018
SSRN Share


  • firm valuation • 
  • director and officer ownership • 
  • liquidity • 
  • Performance history

Using more than 50,000 firm-years from 1988 to 2015, we show that the empirical relation between a firm’s Tobin’s q and managerial ownership is systematically negative. When we restrict our sample to larger firms as in the prior literature, our findings are consistent with the literature, showing that there is an increasing and concave relation between q and managerial ownership.

We show that these seemingly contradictory results are explained by cumulative past performance and liquidity. Better performing firms have more liquid equity, which enables insiders to more easily sell shares after the IPO, and they also have a higher Tobin’s q.

Published in

Published in: 
Publication Title: 
Journal of Financial Economics (JFE), Forthcoming


Real name:
Jérôme Taillard