The Relationship Between Managerial Ownership and Firm Performance: Reviewing and Evaluating

Abstract

The purpose of this paper is to organise a clear theoretical framework on the topic of the relationship between managerial ownership and firm performance by reviewing and analysing different prior literature. Firstly, this study investigates the determinants of managerial ownership, which can be treated as a basic concept of this theme. Among previous literature, this relationship can be divided into two types, linear and non-linear, respectively. Furthermore, the former relation includes both positive and negative, while the latter consists of many types of relations, such as U-shaped, inverse U-shaped, hump-shaped and W-shaped. Then, the reasons for these mixed results are explained. Ultimately, the relationship between managers' shares and corporate performance can also be interpreted from different perspectives, including hostile takeover, voting rights and investments.