Management Ownership and Firm Value: An Empirical Analysis using Panel Data

Sang-Mook Lee ; Keunkwan Ryu

Sang-Mook Lee, Samsung Life Insurance, 11, Seocho-daero 74-gil, Seocho-gu, Seoul 06620, Republic of Korea., Tel: +82-2-772-6830, Fax: +82-2-3709-5502 sm7060.lee@samsung.com
Keunkwan Ryu, Professor, Department of Economics, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 08826, Republic of Korea., Tel: +82-2-880-6397, Fax: +82-2-886-4231 ryu@snu.ac.kr

JEL Classification: C23, C81, D23

Abstract

A majority of existing empirical studies report different relation between ownership and firm value using different sets of cross-sectional data. In this paper, we re-estimate the relation between management ownership and firm value after controlling for the history of management ownership as well as inter-firm differences using a panel data set. Further, we consider the possibility that the current ownership structure is jointly determined with the firm value, an endogeneity argument a la Demsetz (1983). We find that history of the management ownership, not its current level, matters in determining the firm value, which is consistent with information asymmetry arguments.

Keywords:

Convergence-of-interest, Entrenchment, Information asymmetry, Management ownership, Panel data

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