Understanding the Determinants of Managerial Ownership and the Link Between Ownership and Performance

Himmelberg, Charles P.; Hubbard, R. Glenn; Palia, Darius

doi:10.3386/w7209

Cited by 442 publications

(464 citation statements)

References 29 publications

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“…6 The market value of preferred stocks is estimated as preferred dividend times 10. Himmelberg et al (1999) use the same definition. The results presented here are robust to alternative definitions of market value.…”

Section: Baseline Specificationmentioning

confidence: 99%

The impact of leverage on firm investment: Canadian evidence

Aivazian

Qiu

2005

Journal of Corporate Finance

471

407

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This study examines the impact of financial leverage on the firms' investment decisions using information on Canadian publicly traded companies. It shows that leverage is negatively related to investment and that this negative effect is significantly stronger for firms with low growth opportunities than those with high growth opportunities. The paper tests the robustness of these results using alternative empirical models and, in addition, uses the instrumental variable approach to deal with the endogeneity problem inherent in the relationship between leverage and investment. The results provide support to agency theories of corporate leverage, and especially the theory that leverage has a disciplining role for firms with low growth opportunities. D 2005 Elsevier B.V. All rights reserved.JEL classification: G32

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Section: Baseline Specificationmentioning

confidence: 99%

The impact of leverage on firm investment: Canadian evidence

Aivazian

Qiu

2005

Journal of Corporate Finance

471

407

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“…For example, Leech and Leahy (1991) find that better ownership control improves firm performance. 5 In a careful empirical study of the relationship between managerial ownership and firm performance, Himmelberg et al (1999) stress the fact that both ownership and performance are determined endogenously by changes in the firm's contracting environment.…”

Section: Existing Literature On the Determinants Of Firm Productivitymentioning

confidence: 99%

Product market competition, corporate governance and firm performance: an empirical analysis for Germany

Januszewski

Köke

Winter

2002

Research in Economics

142

105

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Productivity growth has been slow in many continental European countries over the last few decades, especially in comparison with the United States. It has been argued that lack of product market competition and poor corporate governance are two of the main reasons for this phenomenon. However, predictions from theoretical models are far from unambiguous, and empirical evidence is sparse, in particular at the level of individual firms. In this paper, we aim to close this gap with an econometric analysis of firm performance in Germany. Based on a unique panel data set with detailed information on almost 400 manufacturing firms over the 1986-94 period, we find that firms operating in industries which are characterized by more intensive product market competition experience higher rates of productivity growth. We also find weak evidence for the notion that in Germany's bank-based system of internal control, ownership concentration is harmful for productivity growth. Keywords Non-technical summaryProductivity growth has been slow in many continental European countries over the last few decades, especially in comparison with the United States. European countries such as Germany and France have low capital performance as measured by capital productivity and various rates of return. Improving productivity is important not only for shareholder value, but also from a public policy perspective: In many countries, social security systems move away from pay-as-you-go systems to more capital-funded systems, and therefore the rate of return on capital will be even more important as a determinant of future generations' welfare than in the past.It has been argued that lack of product market competition and poor corporate governance are the two main reasons for slow productivity growth in continental Europe. However, predictions from theoretical models are far from unambiguous, and empirical evidence is sparse, in particular at the level of individual firms. This study tries to close this gap with an econometric analysis of firm performance in Germany. Using a panel of almost 400 German manufacturing firms that covers the period 1986-94, we analyze how product market competition and corporate governance affect the growth of total factor productivity.Our empirical approach improves on existing empirical studies on corporate governance in Germany in two important respects. First, the data set consists of listed and non-listed firms which also differ in their legal forms. Hence, our analysis is not restricted to public companies with limited liability whose shares are listed (börsennotierte Aktiengesellschaften). Second, we recognize that product market competition and corporate governance are potentially endogenous. To avoid biased regression results, we use an instrumental variables technique.We find that firms which operate in more competitive product markets have a higher growth of total factor productivity. This suggests that an increase in the intensity of competition should result in productivity improvements. Fro...

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“…Himmelberg et al (1999) find that the higher the firm's risk, the lower the managerial ownership. They interpret this as increased firm risk raises the cost of managerial ownership in terms of reduced portfolio diversification and, therefore, managerial ownership is reduced.…”

Section: Introductionmentioning

confidence: 89%