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CEO ownership and firm value

Author

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  • John M. Griffith

    (School of Business and Economics, University of Minnesota, Duluth, MN, USA)

Abstract
This paper examines the hypothesis that the amount of CEO ownership has a dominating effect on the value of the firm. Using a diverse sample of firms, firm value as measured by Tobin's q is found to be a nonmonotonic function of CEO ownership. Specifically, Tobin's q rises when the CEO owns between 0 and 15% and declines as CEO ownership increases to 50%. Beyond 50%, the value starts to rise. Firm value also is found not to be a function of management ownership when CEO ownership is separated out, indicating that CEO ownership does have a dominating effect on firm value. Copyright © 1999 John Wiley & Sons, Ltd.

Suggested Citation

  • John M. Griffith, 1999. "CEO ownership and firm value," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(1), pages 1-8.
    • Handle: RePEc:wly:mgtdec:v:20:y:1999:i:1:p:1-8
    DOI: 10.1002/(SICI)1099-1468(199902)20:1<1::AID-MDE914>3.0.CO;2-T
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    References listed on IDEAS

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    Cited by:

    1. Maurizio La Rocca & Fabiola Montalto & Tiziana La Rocca & Raffaele Staglianò, 2017. "The effect of ownership on firm value: a meta-analysis," Economics Bulletin, AccessEcon, vol. 37(4), pages 2324-2353.
    2. Andy Cosh & Paul Guest & Alan Hughes, 2007. "UK Corporate Governance and Takeover Performance," Working Papers wp357, Centre for Business Research, University of Cambridge.
    3. Deng, Ziliang & Yan, Jiayan & van Essen, Marc, 2018. "Heterogeneity of political connections and outward foreign direct investment," International Business Review, Elsevier, vol. 27(4), pages 893-903.
    4. Sanjiva Prasad & Christopher J. Green & Victor Murinde, 2001. "Company Financing, Captial Structure, and Ownership: A Survey, and Implications for Developing Economies," SUERF Studies, SUERF - The European Money and Finance Forum, number 12 edited by Morten Balling, May.
    5. Martua Eliakim Tambunan & Hermanto Siregar & Adler Haymans Manurung & Dominicus Savio Priyarsono, 2017. "Related Party Transactions and Firm Value in the Business Groups in the Indonesia Stock Exchange," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 7(3), pages 1-1.
    6. Kerstin Lopatta & Thomas Kaspereit & Laura‐Maria Gastone, 2020. "Managerial style in cost asymmetry and shareholder value," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 800-826, July.
    7. Sanjiva Prasad & Christopher J. Green & Victor Murinde, 2005. "Company Financial Structure: A Survey and Implications for Developing Economies," Chapters, in: Christopher J. Green & Colin Kirkpatrick & Victor Murinde (ed.), Finance and Development, chapter 12, Edward Elgar Publishing.
    8. Desai, Ashay & Kroll, Mark & Wright, Peter, 2005. "Outside board monitoring and the economic outcomes of acquisitions: a test of the substitution hypothesis," Journal of Business Research, Elsevier, vol. 58(7), pages 926-934, July.
    9. Eitan Moshe Goldman & Peggy Peiju Huang, 2015. "Contractual vs. Actual Separation Pay Following CEO Turnover," Management Science, INFORMS, vol. 61(5), pages 1108-1120, May.
    10. Karima Bouaiss & Christine Marsal, 2009. "Les mécanismes internes de gouvernance dans les banques:un état de l'art," Revue Finance Contrôle Stratégie, revues.org, vol. 12(1), pages 93-126, March.
    11. Maureen Muller-Kahle, 2015. "The impact of dominant ownership: the case of Anglo-American firms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(1), pages 71-89, February.
    12. Su-Lien Lu & Ying-Hui Li, 2019. "Effect of Corporate Governance on Institutional Investors’ Preferences: An Empirical Investigation in Taiwan," JRFM, MDPI, vol. 12(1), pages 1-21, February.
    13. Kevin Campbell & Antonio Mínguez-Vera, 2008. "Gender Diversity in the Boardroom and Firm Financial Performance," Journal of Business Ethics, Springer, vol. 83(3), pages 435-451, December.
    14. Luo, Shuqing & Courtenay, Stephen M. & Hossain, Mahmud, 2006. "The effect of voluntary disclosure, ownership structure and proprietary cost on the return-future earnings relation," Pacific-Basin Finance Journal, Elsevier, vol. 14(5), pages 501-521, November.
    15. Feimei Liao & Jiaqing Zhang & Songqin Ye, 2023. "Can Equity Incentives Restrain Defensive Behaviors in Corporate Cash Holding Decisions?," SAGE Open, , vol. 13(3), pages 21582440231, August.

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