Title: Association between managerial stock ownership and firm efficiency

Authors: Ju Ryum Chung; Moon-Kyung Cho; Ho-Young Lee

Addresses: School of Business Administration, University of Seoul, 163 Seoulsiripdae-ro, Dongdaemun-gu, Seoul, South Korea ' Division of International Banking and Finance Studies, A.R. Sanchez, Jr. School of Business, Texas A&M International University, 5201 University Boulevard, Laredo, Texas, USA ' School of Business, Yonsei University, 50 Yonse-ro, Seodaemun-gu Seoul, South Korea

Abstract: This study examines how firm efficiency varies according to managerial ownership. Prior studies on how managerial ownership affects firm value provide inconsistent results. Although firm value is determined by various factors, this study tries to directly link managerial ownership to operating efficiency. It finds evidence consistent with the incentive alignment hypothesis: managerial ownership is positively associated with firm efficiency. It also finds that foreign investors enhance the association between managerial ownership and firm efficiency, whereas an affiliation with large business conglomerates in Korea (chaebols) lowers this association. It contributes to the existing literature by linking managerial ownership to firm efficiency, which we believe is an underlying indicator of the effect of managerial ownership on managers' behaviour in alignment/misalignment with firm value. It also helps interested parties better understand the dynamic roles among management and foreign ownership, and chaebols.

Keywords: accounting; managerial ownership; firm efficiency; foreign shareholder ownership; chaebol; data envelopment analysis.

DOI: 10.1504/IJAAPE.2019.106421

International Journal of Accounting, Auditing and Performance Evaluation, 2019 Vol.15 No.4, pp.378 - 409

Accepted: 10 Sep 2019
Published online: 30 Mar 2020 *

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