Managerial ownership and firm performance in Thailand: An empirical analysis

Abstract

This study investigates whether managerial share ownership serves to enhance or detract from firm performance in listed companies in Thailand. The convergence-of-interest hypothesis asserts that firm value increases as management ownership rises. On the other hand, when managers own a substantial fraction of the firm shares, then voting power or other influence may satisfy other non-value- maximizing objectives without endangering other positions. This gives rise to the entrenchment hypothesis, which suggests that excessive insider ownership has a negative impact on corporate performance. The results of this study support both the alignment and entrenchment efforts and therefore the existence of a non-linear relationship between firm performance and managerial ownership. Firm size and industry are also shown to impact significantly on firm performance in Thailand.