Understanding the determinants of managerial ownership and the link between ownership and performance

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

Research output: Contribution to journalArticlepeer-review

1172 Scopus citations


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), (Journal of Political Economy, 93, 1155-1177) 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.

Original languageEnglish (US)
Pages (from-to)353-384
Number of pages32
JournalJournal of Financial Economics
Issue number3
StatePublished - Sep 1999
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


  • Corporate governance
  • D23
  • G14
  • G32
  • L14
  • L22
  • Managerial ownership


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