CEO ownership and firm value

✍ Scribed by John M. Griffith

• Publisher: John Wiley and Sons
• Year: 1999
• Tongue: English
• Weight: 74 KB
• Volume: 20
• Category: Article
• ISSN: 0143-6570
• DOI: 10.1002/(sici)1099-1468(199902)20:1<1::aid-mde914>3.0.co;2-t

✦ Synopsis

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.