NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Kornelia Fabisik

EPFL E EDFI-GE
Quartier UNIL-Dorigny
CH-1015 Lausanne
Switzerland

E-Mail: kornelia.fabisik@epfl.ch
Institutional Affiliation: Ecole Polytechnique Fédérale de Lausanne

NBER Working Papers and Publications

December 2018Why are Firms with More Managerial Ownership Worth Less?
with Rüdiger Fahlenbrach, René M. Stulz, Jérôme P. Taillard: w25352
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.
 
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