Banking Relationships, Managerial Ownership and Operational Performance: A Simultaneous Equations Approach in the Context of SMEs

Abstract

This paper provides new evidence for the relationship between the nature of banking relationships, managerial ownership and operational performance in supporting reciprocal effects between these variables in the context of small and medium enterprises (SMEs). A simultaneous equations model was applied to a sample of 4,163 Portuguese SMEs and to cross-section data. Evidence was found that these attributes provide simultaneous relations among themselves. In particular, on the one hand, our results support a negative effect of the number of banks with which the company works and managerial ownership on operational performance. On the other hand, the number of banks with which the company maintains a relationship is positively conditioned by operational performance and negatively by managerial ownership. In turn, managerial ownership is negatively conditioned by operational performance and the nature of the banking relationship.

Parabolic Effect Between Managerial Ownership And Firm Value To Control Agency Conflict

“…(Formula 8) Formula:HI={Σ(Institutional ownership1 st group 2 +institutional ownership2 nd group 2 +...}...(8)  HI < 0.10  ownership is dispersed to many shareholders  HI > 0.18  ownership is concentrated or monopolized by certain groups (Ma and Tian, 2014) The Effect of Managerial Ownership on Value of the Firm. According to (Augusto and Pinto, 2014), managerial ownership can become a mechanism used by firm to motivate DOI: http://dx.doi.org/10.24912/jm.v23i3.569 361 managers in order to achieve performance. Therefore, the effect such performance will increase the share's market price which finally will increase value of the firm or Tobin Q.…”