Working Paper: NBER ID: w7209
Authors: Charles P. Himmelberg; R. Glenn Hubbard; Darius Palia
Abstract: Both managerial ownership and performance are endogenously determined by exogenous (and only partly observed) changes in the firm's contracting environment. We extend the cross-sectional results of Demsetz and Lehn (1985) and use panel data to show that managerial ownership is explained by key variables in the contracting environment in ways consistent with the predictions of principal-agent models. A large fraction of the cross-sectional variation in managerial ownership is explained by unobserved firm heterogeneity. Moreover, after controlling both for observed firm characteristics and firm fixed effects, we cannot conclude (econometrically) that changes in managerial ownership affect firm performance.
Keywords: No keywords provided
JEL Codes: G3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| managerial ownership (G34) | contracting environment (M55) |
| contracting environment (M55) | managerial ownership (G34) |
| contracting environment (M55) | firm performance (L25) |
| managerial ownership (G34) | firm performance (L25) |
| managerial ownership (G34) | firm performance (L25) |