Managerial Equity Ownership and the Demand for Outside Directors
Year: 2003
Type: article
Abstract: This paper examines the linkage between the use of outside directors and managerial ownership. We conjecture there are two linkages: the standard incentive‐alignment demand for monitoring when managers own little stock and an entrenchment‐amelioration demand when managerial stock ownership is high. As a consequence, we predict the association between managerial ownership and board composition will be nonlinear (U‐shaped if the entrenchment effect is sufficiently pronounced). Using UK data, we find that both quadratic and logarithmic models outperform the simple linear relationship assumed in prior research and that the substitution between managerial ownership and board composition is stronger than hitherto supposed.
Source: European Financial Management
Authors: Kenneth V. Peasnell, Peter F. Pope, Steven Young
Institution: Lancaster University
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3122816225