Managerial ownership, board monitoring and firm performance in a family-concentrated corporate environment

Managerial ownership, board monitoring and firmperformance in a family-concentrated corporate

environment

Peter Chenga, Lixin (Nancy) Sua, Xindong (Kevin) Zhub

aSchool of Accounting and Finance, The Hong Kong Polytechnic University, Hong Kong, ChinabSchool of Business, Renmin University of China, Beijing 100872, China

Abstract

Using data from Hong Kong, a market that has family-concentrated ownershipstructure, we examine the relation between managerial ownership, the board ofdirectors and firm performance. We first conduct analysis on the managerialownership and firm performance to derive the turning points where either ‘con-vergence of interest’ or ‘entrenchment’ effect of managerial ownership is domi-nant. Based on these estimated turning points, we find that at low and high levelof ownership, effective board mitigates the entrenchment effect associated withmanagerial ownership; at medium level of ownership, board effectiveness is lessdemanded. These findings suggest that managerial ownership and board moni-toring are substitutes in mitigating the agency problem between managers andshareholders. We also find that effective board curbs the excessive compensationby entrenched managers to themselves at low level of managerial ownership.

Key words: Board of directors; Family concentration; Firm performance;Managerial compensation; Managerial ownership

JEL classification: G32, L25, J3

doi: 10.1111/j.1467-629X.2011.00448.x

The authors would like to thank Robert Faff (editor), an anonymous referee, Cheong H.Yi, and participants of research workshop at The Hong Kong Polytechnic University fortheir useful comments. We also thank Mr Alvis Lo for his assistance in hand-collectingownership and board data. Peter Cheng acknowledges the financial support from theArea of Strategic Development (ASD) in China Business Services at The Hong KongPolytechnic University, Grant No. A614. All errors are our own.

Received 9 November 2010; accepted 13 September 2011 by Robert Faff (Editor).

� 2011 The AuthorsAccounting and Finance � 2011 AFAANZ

Accounting and Finance

1. Introduction

It has long been recognized that the separation of ownership and control inpublicly owned firms induces potential conflicts between the interests of managersand shareholders (Berle and Means, 1932). Managerial ownership is suggested asone major internal governance mechanism that mitigates the agency problembetween managers and shareholders (Jensen and Meckling, 1976). However, highmanagerial ownership also results in reduced external discipline from manageriallabour market, the product market and the market for corporate control (Morcket al., 1988; Denis et al., 1997). A number of studies show empirically that thereis a nonlinear relation between managerial ownership and firm performance bothin US market (Morck et al., 1988; McConnell and Servaes, 1990) and other coun-tries (Short and Keasey, 1999; Davies et al., 2005; Ng, 2005).Corporate board of directors is often considered as another important internal

governance mechanism in reducing the agency conflict between managers andshareholders (see Fama and Jensen, 1983; Jensen, 1993; Yermack, 1996). Assuch, we expect that the relation between managerial ownership and firm perfor-mance is affected by the effectiveness of board monitoring, depending onwhether the ‘convergence of interest’ or ‘entrenchment’ effect of managerial own-ership is dominant.Prior literature examining the relationship between ownership and perfor-

mance uses managerial ownership as the explanatory variable (see Morck et al.,1988; Short and Keasey, 1999). However, Ng (2005) argues that the concept offamily ownership is more meaningful than that of managerial ownership in HongKong setting. Using data for the period 2000–2003 from Hong Kong, a marketthat has concentrated family ownership structure, we first conduct analysis onthe relation between managerial ownership and firm performance to derive theturning points where either convergence of interest or entrenchment effect is dom-inant. Consistent with Ng (2005), we find an ‘entrenchment–alignment–entrench-ment’ relation, which is inverse to the empirical relation between managerialownership and firm performance found in US or UK firms (Morck et al., 1988;McConnell and Servaes, 1990; Short and Keasey, 1999). We then estimate piece-wise linear regression on the relation between managerial ownership, board effec-tiveness and firm performance according to these estimated turning points. Wefind that at low level of ownership, the interaction between managerial ownershipand board effectiveness is positively associated with firm performance; at mediumlevel of ownership, it is negatively associated, and at high level of ownership, itbecomes positively associated again. These findings are consistent with the inter-pretation that corporate board, as an alternative governance mechanism, substi-tutes managerial ownership in mitigating the agency conflicts when ownershipinduces entrenchment. The findings are robust to alternative turning points in thepiecewise linear regression, the adoption of cubic model and simultaneity rela-tion. We also find that effective board of directors curbs the excessive compensa-tion by entrenched managers to themselves at low level of managerial ownership.

2 P. Cheng et al./Accounting and Finance


This paper contributes to the existing literature in the following ways. First,there is a growing body of literature on the impact of board governance and man-agerial ownership on shareholder value maximization (Hermalin and Weisbach,1991; Barnhart and Rosenstein, 1998; Belkhir, 2009). By showing the improve-ment in firm performance and the reduction in excessive compensation with effec-tive board monitoring when managers are entrenched, we provide direct evidenceon the substitutive role of the two internal governance mechanisms in the share-holder value maximization, thus complement to this literature. Second, priorstudies examining ownership structure are mainly based on data of US or UKcorporations (e.g., Kester, 1992; La Porta et al., 1999; Claessens et al., 2002) withmore diffuse ownership structure. However, the ownership structure in mostother countries, including Western developed countries, is more concentrated1.This paper examines the association among ownership structure, board of direc-tors and firm performance using a setting that is characterized by family-concen-trated ownership, which contributes to the understanding of corporategovernance systems in other ownership concentration regimes. Third, it is arguedthat Asian financial crisis was partly attributed to the lack of effective governancemechanisms (Leung and Horwitz, 2009). Finding evidence of substitutive role ofcorporate board and managerial ownership in such setting highlights the impor-tance of implementing effective internal governance worldwide. The results of thisstudy should be of interest to boards, managers, policy-makers in Hong Kongas well as to those of other markets characterized by firms with concentratedownership structure.The rest of the paper proceeds as follows. Section 2 discusses the unique cor-

porate ownership feature of Hong Kong, reviews the literature and develops thehypotheses. Section 3 introduces the research design including various variabledefinitions. Section 4 presents the sample, the empirical evidence and a numberof robustness checks. Finally, Section 5 summarizes and concludes.

2. Ownership structure in Hong Kong and hypothesis development

The ownership structure in Hong Kong is substantially different from that ofthe United States and the UK, where most of the previous studies of ownershipare based on Morck et al. (1988), and Short and Keasey (1999). Jaggi et al.(2009) argue that although Hong Kong is influenced by English common law,the institutional environment of Hong Kong is ‘characterized by a personalnetworking system (guanxi), which involves around informal relationships ratherthan formal written contracts’ (Jaggi et al., 2009, p284). Therefore, family own-ership concentration in firms is common (e.g., Mok et al., 1992; Claessens et al.,2000; Ng, 2005). The 10 most prominent business families control 32.1 per centof all the corporate assets in Hong Kong (Tsui and Stott, 2004). There are

1 For example, Gabrielsen et al. (2002) documents a high level of managerial ownershipin Scandinavian countries. We thank the anonymous referee for pointing this out.

P. Cheng et al./Accounting and Finance 3


several characteristics of family firms that help to align the interests betweenmanagers and shareholders. Compared to non-family firms, family firms face lesssevere agency problems arising from the separation of ownership and man-agement (Type I agency problems) (see Ali et al., 2007). Also, better knowl-edge about their firms’ activities enables family firms to detect manipulation offinancial statements (Anderson and Reeb, 2003). Moreover, families are likely tomitigate myopic investment decisions by managers (Stein, 1988, 1989; James,1999; Kwak, 2003).However, family firms face more entrenchment problems that arise between

controlling (majority) and non-controlling (minority) shareholders (Type IIagency problems) owing to families’ significant stock ownership and control overthe firms’ board of directors and decision policies (see Ali et al., 2007). Also, Fanand Wong (2002) argue that entrenched controlling shareholders may opportu-nistically deprive the rights of minority shareholders by self-dealing/related-partytransactions in which profits are transferred to other firms or by the pursuit ofno-profit-maximizing objectives for their own benefits.Consistent with the above arguments, Ng (2005) posits that the ‘convergence

of interest’ effect should be dominant in Hong Kong firms at most levels of man-agerial ownership, because (i) managers’ holding shares are mostly family share-holders or related parties of the family shareholders with common goals andinterests and (ii) family members in Hong Kong behave in a collectivist mannerand tend to align their interests more to the firms than the US and UK managerswho are more individualistic (Hofstede, 2001). She also expects that at both rela-tively high and relatively low level of family ownership, the ‘entrenchment’ effectwill override ‘convergence of interest’ because (i) controlling family owners withsufficient control in high-ownership-concentration firms tend to expropriate theminority shareholders (La Porta et al., 1999; Claessens et al., 2002) and (ii) man-agers of low-ownership-concentration firms who are mostly employed profes-sional managers and whose relationships with the firms are not significant tendto seek their own benefits. Consistent with this conjecture, Ng (2005) finds thereis an ‘entrenchment–alignment–entrenchment’ nonlinear relationship betweenownership and firm performance in Hong Kong.In theory, managerial ownership and board of directors are two internal gov-

ernance mechanisms designed to mitigate the agency problem between managersand shareholders (Lasfer, 2006). Thus, when the ‘convergence of interest’ effectof managerial ownership is dominant, there is less demand for board monitoring.Denis and Sarin (1999) find negative linear relation between managerial owner-ship and the proportion of outside board members, which is consistent with thissubstitution effect. Therefore, we expect when the convergence of interest is dom-inant, effective board is not associated with firm performance. On the otherhand, when the ‘entrenchment’ effect is dominant, we expect that board monitor-ing is effective in monitoring entrenched managers and mitigating the agency con-flicts, thus positively related to firm performance. As such, we formalize in thefollowing hypothesis:



H1: There is a positive relation between firm performance and board effectivenesswhen entrenchment effect is dominant and there is no relation between firm perfor-mance and board effectiveness when alignment effect is dominant.

As we argue above, effective board of directors acts as substitute in reducing theagency conflict tomanagerial ownership. In addition to their substitutive effects onfirm performance, the second hypothesis is related to another economic benefit ofeffective board of directors for the (non-controlling) shareholders: the reduction inexcessive chief executive officer (CEO) compensation. Core et al. (1999) argue thatCEO pay is higher in firms with weaker governance, controlling for common payfactors. Holderness and Sheehan (1991) argue that entrenched managers have theopportunity to expropriate wealth from minority shareholders by paying them-selves excessive salaries. Anderson and Reeb (2003) suggest that controlling share-holders are capable of expropriating wealth from firms through excessive compensation.We therefore posit that managerial compensation is positively associated withmanagement entrenchment. Further, the effective monitoring of board will miti-gate such problem.Hence, we expect when entrenchment effect ofmanagerial own-ership is dominant, the expropriation behaviour of managers by paying themselvesexcessively will be mitigated by effective board monitoring. In contrast, when con-vergence of interest effect of managerial ownership is dominant, we expect noexcessive payment ismade and hence no effect of boardmonitoring on such payment.

H2: There is a negative relation between managerial compensation and board effec-tiveness when entrenchment effect is dominant and there is no relation betweenmanagerial compensation and board effectiveness when alignment effect is domi-nant.

3. Research design

3.1. Measures of variables

3.1.1. Ownership variables

Managerial ownership (denoted as SHARE_DIR) is calculated as the percent-age of outstanding shares held by executive directors in the firm.2 The measure

2 Prior literature argues that it is impossible to measure precisely family ownership inHong Kong-listed firms because shares are held by nominees or related companies, as wellas the existing of cross-affiliated company shareholders (e.g. Ng, 2005). Hence, executive-director ownership is used in our study to proxy for managerial/family ownership as onlydirector’s ownership information is disclosed in the annual reports. In additional test, weuse the percentage of shares held by directors (both executive and non-executive) and theresults remain qualitatively similar. Ng (2005) provides some validity test to such measureby showing a high correlation (0.978) between managerial ownership and family share-holding for a subsample of firms for which the family shareholdings can be determinedprecisely.



includes the direct and indirect share holdings by executive directors, which aredisclosed in the annual reports in our sample period.

3.1.2. Board variables

We focus on three aspects of board monitoring and one composite measurecombining the three as follows:

Board size:Prior studies argue that small boards operate more effectively because lar-

ger boards are associated with high coordination costs and free rider prob-lems (Jensen, 1993). Lipton and Lorsch (1992) also argue that large boardsare less effective than small board because the former is easier for a CEO tocontrol. Board size is measured as the number of board members (denotedas TOT_BOD).

Board independence:A number of studies argue that there is a link between effective monitoring

and the presence of outside directors in the board (Weisbach, 1988; Byrd andHickman, 1992; Brickley et al., 1994). John and Senbet (1998) also argue thatboards of directors are more independent with the increase in the proportion ofoutside directors. We measure board independence as the proportion of outsidemembers in board (denoted as OUT_PC).

Split of the roles of chairman and CEO:Fama and Jensen (1983) argue that the duality of the roles of the chairman

and CEO reduces board’s effectiveness in monitoring management. Franks et al.(2001) find that the monitoring role of UK boards increases when the roles ofchairman and CEO are split. Yermack (1996) finds that firms are more valuablewhen CEO is separate from board chair position. The split of CEO and boardchairman (denoted as SPLIT) equals 1 if the CEO is not also the board chair-man and 0 otherwise.

Board effectiveness:The board effectiveness measure (denoted as BOD_EFF) is computed as the

sum of the scaled decile rank3 of the negative value of TOT_BOD4, the scaleddecile rank of OUT_PC and the value of SPLIT. The higher BOD_EFF repre-sents more effective board of directors.

3 The ranks are based on annual sample period distribution of these variables.

4 We use the negative value of the number of board members here so that higher valuerepresents more effective monitoring.



3.2. Managerial ownership and firm performance

As we argue above, we expect a nonlinear relationship between managerialownership and firm performance. To allow such nonlinearity, we include squaresand cubes of SHARE_DIR, consistent with the specification in Ng (2005).In order to make our results comparable to Ng (2005), we use accountingperformance of return on asset (ROA) to gauge firm performance.5 Specifically,we estimate the following model:

ROA ¼ a0 þ a1SHARE DIRþ a2SHARE DIR2 þ a3SHARE DIR3

þ a4SIZEþ a5LEVERAGEþ a6GROWTHþ e:ð1Þ

Following Maury (2006), we control some firm-specific variables that might beassociated with firm performance. Firm size (denoted as SIZE) is measured asthe natural logarithm of the firm’s total sales and is expected to be positivelyassociated with firm performance because of the easiness to access external fundsand economies of scale (Ng, 2005). Firm leverage (denoted as LEVERAGE) iscomputed as the ratio of total debts to total assets and is expected to be nega-tively associated with firm performance as suggested by pecking order theory.Growth in net sales (denoted as GROWTH) is measured as the growth rate ofsales from year t)1 to year t and is expected to be positively associated with firmperformance (Morck et al., 1988).

3.3. Managerial ownership, board monitoring and firm performance

As hypothesized, we expect that the nonlinear relation between managerialownership and board monitoring varies with board effectiveness. To depict thenonlinear relation, we adopt a piecewise linear regression model with the turningpoints empirically derived from model (1). Specifically, managerial ownershipvariable (SHARE_DIR) is split into6:

SHARE DIR A ¼ SHARE DIR; ifSHARE DIR � 22:18%;

¼ 22:18%; ifSHARE DIR>22:18%

5 Alternative firm performance, such as Tobin’s Q, is used as robustness check, and theresults are discussed in Section 4.3.5. Demsetz and Villalonga (2001) argue that it wouldbe more sensible to focus on an estimate of what management has accomplished ratherthan what management will accomplish when examining the relation between ownershipand performance. In addition, it is unclear whether Hong Kong market is efficient to thesame level as US market; thus, we choose to use ROA as the main performance measure.

6 The estimated model is ROA = )1.275 * SHARE_DIR + 3.692 * SHARE DIR2

)2.456 * SHARE DIR3. The turning points (22.18 per cent and 78.02 per cent) areobtained by differentiating ROA with respect to SHARE_DIR and setting it equal to 0.



SHARE DIR B ¼ 0 ifSHARE DIR � 22:18%;

¼ SHARE DIR� 22:18% if 22:18%<SHARE DIR � 78:02%;

¼ 55:84%ð78:02� 22:18%Þ ifSHARE DIR>78:02%:

SHARE DIR C ¼ 0 ifSHARE DIR � 78:02% and

¼ SHARE DIR� 78:02% ifSHARE DIR>78:02%

The piecewise linear regression model is specified as follows:

ROA ¼ b0 þ b1SHARE DIR Aþ b2SHARE DIR Bþ b3SHARE DIR C

þ b4BOD EFFþ b5SHARE DIR A � BOD EFF

þ b6SHARE DIR B � BOD EFFþ b7SHARE DIR C � BOD EFF

þ b8SIZEþ b9LEVERAGEþ b10GROWTHþ b11SIZE � BOD EFF

þ b12LEVERAGE � BOD EFFþ b13GROWTH � BOD EFFþ e:

ð2Þ

All the variables are defined earlier. To allow for both cross-sectional andserial correlation using pooled data, we adjust standard errors by clustering themat both the firm and year dimensions.

3.4. Managerial ownership, board monitoring and managerial compensation

We expect that board effectiveness helps mitigate the agency problem betweenmanagers and shareholders by curbing excessive managerial compensation whenentrenchment effect is dominant; board effectiveness has no effect on managerialcompensation when alignment effect is dominant. We estimate the followingmodel to test the impact of having effective board monitoring on compensation(denoted as COMP and measured as the natural logarithm of the total cash com-pensation and the change in the value of stock holding of executive directors):

COMP ¼ c0 þ c1SHARE DIR Aþ c2SHARE DIR Bþ c3SHARE DIR C

þ c4BOD EFFþ c5SHARE DIR A � BOD EFF

þ c6SHARE DIR B � BOD EFFþ c7SHARE DIR C � BOD EFF

þ c8SIZEþ c9LEVERAGEþ c10ROAþ c11RETURN

þ c12INST PCþ c13MTBþ c14REGUþ c15SIZE � BOD EFF

þ c16LEVERAGE � BOD EFFþ c17ROA � BOD EFF

þ c18RETURN � BOD EFFþ c19INST PC � BOD EFF

þ c20MTB � BOD EFFþ c21REGU � BOD EFFþ e: ð3Þ

Following Core et al. (1999), we include the following set of control variables.Prior literature argues that larger firms with greater growth opportunities tend to



demand higher-quality managers with higher equilibrium wages (Rosen, 1982and Smith and Watts, 1992). Therefore, we control for firm size (denoted asSIZE) and investment opportunities (denoted as MTB and measured as the ratioof market value to book value of equity) and expect them to be positively associ-ated with managerial compensation. Core et al. (1999) point out that the level ofmanagerial pay is an increasing function of firm performance. Therefore, we con-trol for the firm’s ROA and past annual stock return ending three months afterfiscal year end (denoted as RETURN) and expect them to have positive effectson managerial compensation. Following Core et al. (1999), institutional share-holdings (denoted as INST_PC) is included in the regression and expected to benegatively associated with pay, where INST_PC is measured by the percentageof institutional investors’ holdings of the outstanding shares, where institutionalinvestor is defined as a blockholder who owns 5 per cent or more of the out-standing shares. Lippert and More (1994) and Lippert and Porter (1997) findthat executive compensation is higher for firms with higher risk. Hence, we alsoinclude firm’s leverage (LEVERAGE) as another control variable. Murphy(1999) finds that executive compensation is lower for regulated industries. Thus,we include regulated industry dummy variable (denoted as REGU) in the model,which is coded as 1 for regulated industries and 0 otherwise. These variablesdetermine the expected level of compensation given the firm performance andother characteristics that are unrelated to managerial ownership and boardmonitoring effects.

4. Sample and empirical results

4.1. Sample selection

Table 1 summarizes the sample selection process. The ownership data, boarddata and compensation data are hand-collected from the annual reports of allpublic firms in Hong Kong over our sample period 2000–2003. The sample per-iod stops at 2003 to allow sufficient cross-sectional variation in board variablesbecause there is mandatory change in the governance landscape in Hong Kongsince March 20047. Financial data of firms are obtained from WORLDSCOPEdatabase. We merge the annual report data and WORLDSCOPE data andexclude firm-year observations of financial institutions and mutual funds, whichyields 1772 firm-year observations. We exclude firm-year observations with miss-ing data for the firm performance analysis. We also winsorize the financial vari-ables at the top and bottom 1 per cent to correct for potential outliers.8 The final

7 For example, it was not until 2004 when Hong Kong Stock Exchange required of atleast three independent members on the board of directors.

8 The results are qualitatively similar when we (i) delete these observations or (ii) do notemploy winsorization.



sample used to analyse managerial ownership, board monitoring and firmperformance contains 1475 firm-year observations for the time period2000–2003. The sample used to analyse managerial compensation is reduced to1165 because of missing data required to calculate managerial compensation andrelated control variables.

4.2. Descriptive statistics and correlations

Panel A of Table 2 summarizes the descriptive statistics of the variables usedto test the relationship between managerial ownership, board monitoring andfirm performance as well as managerial compensation. The mean managerialownership is 30.0 per cent with a median of 27.7 per cent. On average, manage-rial ownership level is smaller than that reported in Ng (2005) (mean of 40.89 percent with a sample period of 1995–1998). This is expected as the latter uses totaldirector ownership to proxy for managerial/family ownership9. On average, thesize of board is 9.16 with 40.6 per cent outside directors and there are 62.6 percent firms whose CEO is also board chairman. It is also shown that our samplefirms have an average of HK dollar 816 million in total sales, 20.7 per cent inleverage, 5.7 per cent in sales growth, and 1.46 in market-to-book ratio.Panel B of Table 2 shows the Pearson correlation matrix for the variables. It

reveals that firm performance (ROA) is positively associated with managerialownership (SHARE_DIR). This suggests that firm performance increases withthe higher ownership concentration, which is consistent with the ‘convergence ofinterest’ argument. ROA is positively correlated with COMP, indicating thatexecutive pay increases with firm performance. Correlations among the firm-levelindependent variables are generally low. SHARE_DIR is positively correlated

Table 1

Sample selection

N

Firm-year observations in WORLDSCOPE merged with manually

collected ownership, board and compensation data from 2000 to 2003a 1772

Less:

Firm-year observations with missing data for firm performance analysis

1475

Sample for analysis of managerial ownership, board

effectiveness and firm performance

Less:

Firm-year observations with missing data for managerial compensation analysis

1165

Sample for analysis of managerial ownership, board effectiveness

and managerial compensation

aFinancial institutions and mutual funds have been excluded from the sample.

9 The mean of total director ownership in our sample is 34.50 per cent with a median of34.85 per cent.



Tab

le2

Descriptive

statisticsfordependentvariable,testvariablesan

dfirm

-levelcontrolvariables

Pan

elA:Distributional

properties

ofdependentvariable,testvariab

lesan

dcontrolvariab

les

Variable

NMean

Std.Dev.

25%

Median

75%

ROA

1475

)0.023

0.520

)0.032

0.024

0.066

COMP

1165

16.115

1.811

15.145

15.981

16.932

SHARE_D

IR1475

0.300

0.276

0.006

0.277

0.534

TOT_B

OD

1475

9.163

3.268

7.000

9.000

11.000

OUT_P

C1475

0.406

0.166

0.285

0.400

0.500

SPLIT

1475

0.374

0.484

00

1.000

BOD_E

FF

1475

1.384

0.600

1.000

1.333

1.889

SIZ

E1475

20.521

1.753

19.207

20.240

21.582

LEVERAGE

1475

0.207

0.191

0.057

0.168

0.308

GROWTH

1475

0.057

0.527

)0.153

0.017

0.185

RETURN

1165

0.309

1.345

)0.245

0.059

0.497

INST_P

C1165

0.214

0.287

00

0.500

MTB

1165

1.456

2.844

0.387

0.708

1.375

REGU

1165

0.303

0.459

00

1

Pan

elB:Correlations(Pearson)betweendependentvariab

le,testvariab

lesandfirm

-levelcontrolvariab

les

Variable

ROA

COMP

SHARE_

DIR

TOT_

BOD

OUT_

PC

SPLIT

BOD_

EFF

SIZ

ELEVERAGE

GROWTH

RETURN

INST_

PC

MTB

ROA

1

COMP

0.135

1

SHARE_

DIR

0.053

0.327

1

TOT_B

OD

0.032

0.025

)0.210

1

OUT_P

C)0.031

0.018

)0.031

0.120

1



Tab

le2(continued)

Pan

elB:Correlations(Pearson)betweendependentvariab

le,testvariablesan

dfirm

-levelcontrolvariables

Variable

ROA

COMP

SHARE_

DIR

TOT_

BOD

OUT_

PC

SPLIT

BOD_

EFF

SIZ

ELEVERAGE

GROWTH

RETURN

INST_

PC

MTB

SPLIT

0.033

)0.037

)0.031

0.180

0.009

1

BOD_E

FF

)0.007

)0.024

0.054

)0.327

0.452

0.687

1

SIZ

E)0.001

0.227

)0.202

0.336

0.013

0.099

)0.086

1

LEVERAGE

)0.062

)0.060

)0.036

0.028

0.015

0.050

0.033

0.002

1

GROWTH

0.095

0.052

0.000

)0.011

)0.031

)0.006

)0.022

0.061

0.123

1

RETURN

0.010

0.051

0.057

)0.072

)0.104

)0.010

)0.021

0.108

)0.035

)0.005

1

INST_PC

0.058

)0.146

)0.353

0.191

0.045

0.073

)0.029

0.143

0.013

0.030

)0.024

1

MTB

)0.102

0.056

0.042

)0.060

)0.043

)0.020

0.015

0.215

0.008

0.023

0.279

)0.095

1

REGU

)0.032

0.005

)0.049

)0.069

0.023

)0.011

0.045

0.052

0.041

0.029

)0.015

)0.011

)0.014

Variabledefinitions:

ROA,Theratioofearningsbefore

interest

andtaxesto

totalassetsin

year

t;COMP,Thenaturallogarithm

ofthetotalcash

compensationandthechan

ge

inthevalueofstock

holdingofexecutive

directors

inyeart;SHARE_D

IR,Thepercentage

ofexecutive

directors’holdings

ofthetotaloutstandingshares

in

yeart;TOT_BOD,thenumber

ofboard

mem

bersin

yeart;OUT_P

C,Theproportionofnon-executive

directors

andindependentdirectors

onboardsin

yeart;SPLIT

,Dummyvariab

le,coded

for1iftheroleofchiefexecutive

officeran

dboardchairissplitan

d0otherwisein

year

t;BOD_E

FF,Boardeff

ec-

tiveness,computedas

thesum

ofthescaleddecilerankofthenegativevalueofTOT_B

OD,thescaled

decilerankofOUT_P

Can

dthevalueofSPLIT

;

SIZ

E,Thenaturallogarithm

ofacompan

y’stotalsalesin

yeart;LEVERAGE,Theratiooftotaldebtsto

totalassetsin

year

t;GROWTH,Thegrowth

rate

ofsalesfrom

yeart)1to

yeart;RETURN,The12-m

onth

stock

return

endingthreemonthsaftertheendoffiscal

year

t;IN

ST_PC,Thepercentage

ofinsti-

tutional

investors’holdings

ofthetotaloutstandingshares

inyear

t;MTB,Theratioofmarket

valueto

bookvalueofequityin

year

t;REGU,Thedummy

variable,1forregu

latedindustry

and0otherwise.

Bold

text

indicates

two-tailsign

ificance

atthe0.10

levelorless.



with BOD_EFF, which suggests that effective board is generally in greater needas managerial ownership increases.

4.3. Multivariate results

4.3.1. Managerial ownership and firm performance in Hong Kong

Table 3 presents the regression results for the relationship between managerialownership and firm performance. Specifically, at a relatively low level of owner-ship ranging from 0 per cent to 22.18 per cent, firm performance is negativelyassociated with ownership concentration, suggesting the management ‘entrench-ment’ effect. At a wide medium ownership range from 22.18 per cent to 78.02per cent, the relationship is positive, which is consistent with the ‘convergence ofinterest’ effect suggested by Jensen and Meckling (1976). At a very high owner-ship level beyond 78.02 per cent, the relationship becomes negative, which againsuggests that ‘entrenchment’ effect dominates ‘convergence of interest’ effect.Panel A of Table 4 presents the distribution of firms across different ownership

ranges. The turning points of our study are different from those of Ng’s (2005)study (17 per cent and 63 per cent) based on a sample period from 1995 to 1998. Apossible explanation of the higher entrenchment domain threshold is that recentlycorporate governance attracts wide attention and as a result the quality of gover-nance as well as the protection of minority shareholders improved. Consequently,managers need to have higher levels of ownership before they become entrenched.Panel B of Table 4 reports the mean of ownership and board variables across

different ownership ranges. To further test the relation between the two monitor-ing mechanisms, we partition the sample into two sub-ranges of below- and

Table 3

Managerial ownership and firm performance

Variables Coeff. estimate Robust t-statistics P-value

Intercept 0.108 0.64 0.521

SHARE_DIR )1.275*** )3.44 0.001

SHARE_DIR2 3.692*** 3.21 0.001

SHARE_DIR3 )2.456*** )2.68 0.008

SIZE )0.003 )0.43 0.666

LEVERAGE )0.199*** )2.81 0.005

GROWTH 0.101*** 3.90 0.000

N 1475

R2 3.7%

F-statistics 6.23

Significance of F 0.000

N denotes the number of firm-year observations. t-Statistics are calculated based on robust standard

errors clustered at the firm and year level. *, ** and ***Significance at level of 10 per cent, 5 per cent

and 1 per cent, respectively, for the two-tailed tests. The dependent variable is ROA. All variables are

defined in Table 2.



above median of managerial ownership within each range. The board effective-ness variable is lower (higher) for above-median than below-median managerialownership when convergence of interest (entrenchment) is dominant at medium(high and low) level of managerial ownership10, suggesting a substitution effectof effective board in mitigating managerial entrenchment.

4.3.2. Managerial ownership, board monitoring and firm performance

Table 5 presents the results of the piecewise linear model that examines therelationship between managerial ownership, board monitoring and firm perfor-mance. As SHARE_DIR_A (B and C) are defined based on the turning pointsestimated above, the coefficients of these variables are, by construct, consistentwith ‘entrenchment–convergence–entrenchment’.

Table 4

Descriptive statistics across different ownership ranges

Panel A: Distribution of firms

Managerial

ownership (SHARE_DIR)

Number of firm-year

observations

Percentage of total

firm-year observations Ownership range

Below 22.18% 668 45.3 Entrenchment

22.19–78.02% 752 51.0 Alignment

Above 78.03% 55 3.7 Entrenchment

Total 1475 100

Panel B: Mean of board variables

Ownership

range Sub-range N SHARE_DIR TOT_BOD OUT_PC SPLIT BOD_EFF

Entrenchment Below-median

SHARE_DIR

334 0.30% 10.510 0.399 0.366 1.246

Above-median

SHARE_DIR

334 7.03% 9.452 0.412 0.402 1.401

Alignment Below-median

SHARE_DIR

376 37.11% 8.417 0.425 0.368 1.473

Above-median

SHARE_DIR

376 62.30% 8.506 0.394 0.353 1.404

Entrenchment Below-median

SHARE_DIR

27 83.15% 9.653 0.400 0.461 1.376

Above-median

SHARE_DIR

28 90.63% 7.851 0.341 0.408 1.387

N denotes the number of firm-year observations. All variables are defined in Table 2.

10 The exception is that OUT_PC and SPLIT decrease with managerial ownership whenmanagers are entrenched at high ownership level.



The interaction term between SHARE_DIR_A and board effectiveness(BOD_EFF) and the interaction term between SHARE_DIR_C and BOD_EFFare significantly positive (t-stat = 1.67 and t-stat = 2.09, respectively), suggest-ing that negative relation between firm performance and ownership concentra-tion is mitigated by effective board of directors at lower and higher managerialownership level where the entrenchment effect is dominant. In contrast, the inter-action term between SHARE_DIR_B and BOD_EFF is significantly negative(t-stat = )2.42). It means that the effectiveness of board monitoring on firm per-formance is decreasing beyond the point where managers are entrenched, whichindicates that there is less demand for effectiveness of board monitoring whenmanagerial ownership induces better firm performance.

Table 5

Managerial ownership, board effectiveness and firm performance

Variables Coeff. estimate Robust t-stat P-value

Intercept 0.658 1.55 0.121

SHARE_DIR_A )1.516** )2.13 0.034

SHARE_DIR_B 1.033*** 2.88 0.004

SHARE_DIR_C )1.915*** )4.27 0.000

BOD_EFF )0.404** )2.50 0.012

SHARE_DIR_A*BOD_EFF 0.589* 1.67 0.095

SHARE_DIR_B*BOD_EFF )0.411** )2.42 0.015

SHARE_DIR_C*BOD_EFF 1.450** 2.09 0.037

SIZE )0.029 )1.31 0.189

LEVERAGE )0.258 )1.15 0.250

GROWTH 0.151 1.63 0.104

SIZE*BOD_EFF 0.151 1.63 0.104

LEVERAGE*BOD_EFF 0.044 0.27 0.786

GROWTH*BOD_EFF )0.036 )0.68 0.497

N 1475

R2 0.033

F-statistics 5.04




and 1 per cent, respectively, for the two-tailed tests. The dependent variable is ROA.

SHARE DIR A ¼ SHARE DIR; ifSHARE DIR � 22:18%;

¼ 22:18%; ifSHARE DIR>22:18%

SHARE DIR B ¼ 0 ifSHARE DIR � 22:18%;

¼ SHARE DIR� 22:18% if 22:18%<SHARE DIR � 78:02%;

¼ 55:84% ð78:02� 22:18%Þ ifSHARE DIR>78:02%

SHARE DIR C ¼ 0 ifSHARE DIR � 78:02% and

¼ SHARE DIR� 78:02% ifSHARE DIR>78:02%

All other variables are defined in Table 2.



In sum, the evidence of Table 5 suggests that at lower and higher ownershiplevel where managers are entrenched, effective board of directors serves assubstitute to managerial ownership to mitigate the agency conflict; at mediumownership level where the convergence of interest effect is dominant, there is lessdemand for effective board of directors.

4.3.3. Managerial ownership, board monitoring and managerial compensation

Table 6 shows empirical evidence of how the relation between managerialcompensation and ownership concentration varies with board effectiveness.The relation between compensation and ownership is positive at lower levelof ownership (t-stat = 4.64), which suggests that managers are paid exces-sively after controlling for the common determinants of compensation.

Table 6

Managerial ownership, board effectiveness and managerial compensation

Variables Coeff. estimate Robust t-stat P-value

Intercept 7.896*** 3.61 0.000

SHARE_DIR_A 9.204*** 4.64 0.000

SHARE_DIR_B 0.738 0.58 0.565

SHARE_DIR_C 4.025 0.51 0.612

BOD_EFF 1.483 1.11 0.269

SHARE_DIR_A*BOD_EFF )2.302* )1.86 0.061

SHARE_DIR_B*BOD_EFF )0.447 )0.55 0.579

SHARE_DIR_C*BOD_EFF 3.378 0.71 0.475

SIZE 0.355*** 3.22 0.001

LEVERAGE )0.185 )0.22 0.826

ROA )0.102 )0.56 0.579

RETURN )0.086 )0.71 0.478

INST_PC )0.763** )1.97 0.049

MTB 0.132* 1.84 0.066

REGU )0.300 )1.09 0.277

SIZE*BOD_EFF )0.063 )0.94 0.347

LEVERAGE*BOD_EFF 0.246 0.49 0.624

ROA*BOD_EFF 0.252 0.41 0.685

RETURN*BOD_EFF 0.056 0.75 0.452

INST_PC*BOD_EFF 0.410 1.61 0.108

MTB*BOD_EFF )0.056 )1.26 0.207

REGU*BOD_EFF )0.161 0.96 0.338

N 1165

R2 0.224

F-statistics 15.75




and 1 per cent, respectively, for the two-tailed tests. The dependent variable is COMP. All variables

are defined in Tables 2 and 5.



When managerial ownership is higher, there is no significant relationbetween compensation and ownership. The interaction term between SHARE_DIR_A and BOD_EFF is negative (t-stat = )1.86), revealing that theexcessive payments when managers are entrenched at low ownership level areattenuated by effective board of directors. The interaction between SHARE_DIR_B and BOD_EFF is insignificant (t-stat = )0.55), consistent with theexpectation that there is no effect of board monitoring on excessive managerialcompensation when alignment effect is dominant. Overall, the evidence ofTable 6 shows that effective board of directors plays a significant governancerole in controlling wealth expropriation of non-controlling shareholders byreducing the excessive payment to entrenched managers at the low level ofmanagerial ownership.

4.3.4. Endogeneity issue

If managerial ownership is endogenously determined, the Ordinary LeastSquares (OLS) regression of Hypothesis 1 might be misspecified. In addition,Anderson et al. (2000) show that agency theory posits simultaneous relationsbetween performance and the level of pay. The OLS regression of Hypothesis2 might be misspecified if the simultaneous relation is ignored. As managerialownership, firm performance, board effectiveness and managerial compensationare interrelated, we estimate the simultaneous equations system as following,which is similar to those used in Ng (2005):

ROA ¼ h0 þ h1SHARE DIRþ h2BOD EFFþ h3SIZE

þ h4LEVERAGEþ h5GROWTHþ eð4Þ

SHARE DIR ¼ /0 þ /1ROAþ /2BOD EFFþ /3SIZEþ /4COMPþ e ð5Þ

COMP ¼ #0 þ #1ROAþ #2SHARE DIRþ #3BOD EFFþ #4SIZEþ #5RETURNþ #6INST PCþ #7MTBþ #8REGUþ e

ð6Þ

BOD EFF ¼ u0 þ u1ROAþ u2SHARE DIRþ u3SIZEþ e: ð7Þ

We use the generalized method of moments (GMM) to estimate the systemof simultaneous equations, and the results are shown in Table 711,12. The results

11 Ng (2005) argues that the GMM is better than the two-stage least squares method inthat it is a robust estimator; it does not require information of the exact distribution as tothe disturbances and it is robust to heteroskedasticity and/or autocorrelation of unknownform.

12 For brevity, we did not report the results of control variables for each model.



in Table 7 show that ROA is positively and significantly associated withSHARE_DIR and COMP, which is consistent with prior literature (t-stat = 2.24 and t-stat = 2.69, respectively) while SHARE_DIR is not affectedby ROA (t-stat = 1.26) or COMP (t-stat = 1.29). The results indicate that own-ership determines firm performance and compensation level and not vice versa.These indicate that it is unlikely that OLS regressions in testing Hypothesis 1and 2 are misspecified.

4.3.5. Other robustness checks

First, we rerun all regressions using each individual component of board effec-tiveness measure (BOD_EFF) and examine the effect of board size (TOT_BOD),board independence (OUT_PC) and chairman/CEO split (SPLIT) on the rela-tion between managerial ownership and firm performance, and on the relationbetween managerial ownership and managerial compensation. The untabulatedresults are qualitatively similar to our main findings and consistent with ourhypotheses. Second, we also use Tobin’s Q as an alternative to measure firm per-formance. The untabulated results show that only at high level of ownership,effective board mitigates the entrenchment effect and no significant results arefound at the low and median ownership level. Third, to avoid the misspecifica-tion of the regression model, a cubic model is conducted to capture nonlinearity

Table 7

Simultaneous equation estimation

Variables Coeff. estimate t-Stat P-value

Panel A: dependent variable = ROA

SHARE_DIR 0.387** 2.24 0.026

BOD_EFF 0.215 0.94 0.347

Control variables

Panel B: dependent variable = SHARE_DIR

ROA 0.809 1.26 0.208

BOD_EFF )0.298 )0.82 0.415

COMP 0.118 1.29 0.197

Control variables

Panel C: dependent variable = COMP

ROA 0.732*** 2.69 0.007

SHARE_DIR 0.355 0.58 0.564

BOD_EFF 0.683** 2.22 0.027

Control variables

Panel D: dependent variable = BOD_EFF

ROA )1.072*** )3.25 0.001

SHARE_DIR )0.592*** )2.69 0.007

Control variables

*, ** and ***Significance at level of 10 per cent, 5 per cent and 1 per cent, respectively, for the two-

tailed tests. All variables are defined in Table 2.



relation between firm performance, ownership and board without specificallyidentifying the turning points. Although not tabulated, the main inferenceremains unchanged. Lastly, we also use the turning points of 17 per cent and 63per cent as derived from Ng’s (2005) study in the piecewise regressions. Our find-ings remain unchanged.

5. Conclusions

Using Hong Kong data from 2000 to 2003, this paper examines the relationbetween the level of managerial ownership, the effectiveness of board monitoringand firm performance. We extend the study of Ng (2005) and find the consistentresults that managerial ownership has an ‘entrenchment–alignment–entrench-ment’ effect on firm performance. Adopting the turning points derived from thismodel, we estimate a piecewise linear regression model and the results reveal thatwhen convergence of interest effect of managerial ownership is dominant, effec-tive board of director is less demanded; however, when management entrench-ment is dominant, effective board of director mitigates the negative relationbetween firm performance and ownership concentration. These findings are con-sistent with the interpretation that effective board of directors, as an alternativegovernance mechanism, acts as substitute to managerial ownership in mitigatingthe agency conflicts when managers are entrenched. Moreover, higher ownershipis associated with excessive compensation to managers when managers areentrenched and such excessive compensation is curbed by effective board moni-toring at low ownership level. These results provide some evidence on theeconomic benefits to (non-controlling) shareholders of having effective boardwith entrenched managers.There are some caveats to our study, which might open room for future

research. First, Bennedsen et al. (2007) find that family members’ successions asCEO have a significant negative causal impact on firm performance. Hence, onecould argue that first-generation managerial ownership is likely to be more effec-tive as a governance mechanism than second-generation managerial ownership13.Owing to data limitation, we leave this issue for further research. Second, wefocus on managerial ownership and board monitoring, both of which are inter-nal corporate governance mechanisms. Future research can examine the demandfor external governance such as takeover threat.

References

Ali, A., T. Chen, and S. Radhakrishnan, 2007, Corporate disclosures by family firms,Journal of Accounting and Economics 44, 238–286.

Anderson, R., and D. Reeb, 2003, Founding family ownership and firm performance:evidence from the S&P 500, Journal of Finance 58, 1301–1328.

13 We thank anonymous referee for pointing this out.



Anderson, M. C., R. D. Banker, and S. Ravindran, 2000, Executive compensation infor-mation technology industry, Management Science 46(4), 1411–1438.

Barnhart, S. W., and S. Rosenstein, 1998, Board composition, managerial ownership, andfirm performance: an empirical analysis, The Financial Review 33, 1–16.

Belkhir, M., 2009, Board structure, ownership structure and firm performance: evidencefrom banking, Applied Financial Economics 19, 1581–1593.

Bennedsen, M., K. M. Nielsen, P. G. Francisco, and D. Wolfenzon, 2007, Inside thefamily firm: the role of families in successions decision and performance, QuarterlyJournal of Economics 122, 647–691.

Berle, A., and G. Means, 1932, The Modern Corporation and Private Property (Harcourt,Brace & World, New York).

Brickley, J., J. Coles, and R. Terry, 1994, Outside directors and the adoption of poisonpills, Journal of Financial Economics 35, 317–332.

Byrd, J. W., and K. A. Hickman, 1992, Do outside directors monitor managers? Journalof Financial Economics 32, 195–221.

Claessens, S., S. Djankov, and L. Lang, 2000, The separation of ownership and control inEast Asian corporations, Journal of Financial Economics 58, 81–112.

Claessens, S., S. Djankov, J. Fan, and L. Lang, 2002, Disentangling the incentive andentrenchment effects of large shareholdings, Journal of Finance 57, 2741–2771.

Core, J. E., R. W. Holthausen, and and. D. F. Larcker, 1999, Corporate governance,chief executive officer compensation, and firm performance, Journal of Financial Eco-nomics 51, 371–406.

Davies, J. R., D. Hillier, and P. McColgan, 2005, Ownership structure, managerial behav-ior and corporate value, Journal of Corporate Finance 11, 645–660.

Demsetz, H., and B. Villalonga, 2001, Ownership structure and corporate performance,Journal of Corporate Finance 7, 209–233.

Denis, D., and A. Sarin, 1999, Ownership and board structures in publicly traded f firms,Journal of Financial Economics 52, 187–223.

Denis, D. J., D. Denis, and A. Sarin, 1997, Ownership structure and top executive turn-over, Journal of Financial Economics 45, 193–221.

Fama, E. F., and M. C. Jensen, 1983, Agency problems and residual claims, Journal ofLaw and Economics 26, 327–349.

Fan, J. P.H., and T. J.Wong, 2002, Corporate ownership structure and the informativenessof accounting earnings in East Asia, Journal of Accounting and Economics 33, 401–425.

Franks, J., C. Mayer, and L. Renneboog, 2001, Who disciplines management in poorlyperforming companies? Journal of Financial Intermediation 10, 209–239.

Gabrielsen, G., J. D. Gramlich, and T. S. Plenborg, 2002, Managerial ownership, infor-mation content of earnings, and discretionary accruals in a non-US setting, Journalof Business Finance and Accounting 29, 967–988.

Hermalin, B. E., and M. S. Weisbach, 1991, The effects of board composition and directincentives on firm performance, Financial Management 20(4), 101–112.

Hofstede, G. 2001, Culture Consequences – Comparing Values, Behaviors, Institutions, andOrganizations Across Nations (Sage Publications, London).

Holderness, C., and D. Sheehan, 1991, Monitoring an owner: the case of turnover broad-casting, Journal of Financial Economics 30, 325–346.

Jaggi, B., S. Leung, and F. Gul, 2009, Family control, board independence and earningsmanagement: evidence based on Hong Kong firms, Journal of Accounting and PublicPolicy 28, 281–300.

James, H., 1999, Owner as a manager, extended horizons and the family firm, Interna-tional Journal of Economics of business 6, 41–56.

Jensen, M., 1993, The modern industrial revolution, exit and the failure of internalcontrol systems, Journal of Finance 48, 831–880.



Jensen, M., and W. H. Meckling, 1976, The theory of the firm: managerial behavior,agency costs and ownership structure, Journal of Financial Economics 3, 305–360.

John, K., and L. W. Senbet, 1998, Corporate governance and board effectiveness, Journalof Banking and Finance 22, 371–403.

Kester, W. C., 1992, Industrial groups as systems of contractual governance, OxfordReview of Economic Policy 8, 24–44.

Kwak, M., 2003, The advantages of family ownership, MIT Sloan Management Review44, 12.

La Porta, R., F. Lopez-de-Silanes, and A. Shleifer, 1999, Corporate ownership aroundthe world, Journal of Finance 54, 471–518.

Lasfer, M. A., 2006, The interrelationship between managerial ownership and boardstructure, Journal of Business Finance and Accounting 33, 1006–1033.

Leung, S., and B. Horwitz, 2009, Corporate governance and firm value during a financialcrisis, Review of Quantitative Finance and Accounting 34, 459–481.

Lippert, R. L., and W. T. More, 1994, Compensation contracts of chief executive officers:determinants of pay-performance sensitivity, Journal of Financial Research 3, 321–332.

Lippert, R. L., and G. Porter, 1997, Understanding CEO pay: a test of two pay to perfor-mance sensitivity measures with alternative measures of alignment and influence,Journal of Business Research 40, 127–138.

Lipton, M., and J. W. Lorsch, 1992, A modest proposal for improved corporate gover-nance, Business Lawyer 48, 59–77.

Maury, B., 2006, Family ownership and firm performance: empirical evidence fromWestern European corporations, Journal of Corporate Finance 12, 321–341.

McConnell, J., and H. Servaes, 1990, Additional evidence on equity ownership andcorporate value, Journal of Financial Economics 27, 595–612.

Mok, H., K. Lam, and I. Cheung, 1992, Family control and return covariation in HongKong’s common stocks, Journal of Business Finance and Accounting 19, 277–293.

Morck, R., A. Shleifer, and V. Vishny, 1988, Managerial ownership and market valua-tion: an empirical analysis, Journal of Financial Economics 20, 293–315.

Murphy, K. J., 1999, Executive compensation, in: O. Ashenfelter, D. Card, eds, Hand-book of Labor Economics 3 (Orley Ashenfelter and David Card, Amsterdam),2485–2563.

Ng, C. Y. M., 2005, An empirical study on the relationship between ownership andperformance in a family-based corporate environment, Journal of Accounting, Auditingand Finance 20, 121–146.

Rosen, S., 1982, Authority, control and the distribution of earnings, Bell Journal ofEconomics 13, 311–323.

Short, H., and K. Keasey, 1999, Managerial ownership and the performance of firms:evidence from the UK, Journal of Corporate Finance 5, 79–101.

Smith, C. W., and R. L. Watts, 1992, The investment opportunity set and corporatefinancing, dividend, and financing policies, Journal of Financial Economics 32, 262–292.

Stein, J., 1988, Takeover threats and managerial myopia, Journal of Political Economy 96,61–80.

Stein, J., 1989, Efficient capital markets, inefficient firms: a model of myopic corporatebehavior, Quarterly Journal of Economics 104, 655–669.

Tsui, J., and V. Stott, 2004, Governance in family-owned Hong Kong corporations, in:F. A. Gul, J. Tsui, eds, The Governance of East Asian Corporations: Post Asian Finan-cial Crisis. Palgrave Macmillan, New York.

Weisbach, M., 1988, Outside directors and CEO turnover, Journal of Financial Economics20, 413–460.

Yermack, D., 1996, Higher market valuation of companies with a small board of direc-tors, Journal of Financial Economics 40, 185–211.



Documents

Managerial ownership, board monitoring and firm performance in a family-concentrated corporate environment