TY  - JOUR
AU  - Fahlenbrach,Rüdiger
AU  - Stulz,René M.
TI  - Managerial Ownership Dynamics and Firm Value
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13202
PY  - 2007
Y2  - June 2007
UR  - http://www.nber.org/papers/w13202
L1  - http://www.nber.org/papers/w13202.pdf
N1  - Author contact info:
Rüdiger Fahlenbrach
Ecole Polytechnique Fédérale de Lausanne (EPFL)
Quartier UNIL-Dorigny Bâtiment Extranef, # 211
1015 Lausanne
Switzerland
E-Mail: ruediger.fahlenbrach@epfl.ch

Rene M. Stulz
The Ohio State University
Fisher College of Business
806A Fisher Hall
Columbus, OH 43210-1144
Tel: 614/292-1970
Fax: 614/292-2359
E-Mail: stulz_1@cob.osu.edu
AB  - From 1988 to 2003, the average change in managerial ownership is significantly negative every year for American firms. The probability of large decreases in ownership is strongly increasing in contemporaneous and past stock returns but the probability of large increases in ownership through managerial purchases of shares is not. The relation between changes in Tobin's q and past and contemporaneous changes in ownership depends critically on controlling for past stock returns. When controlling for past stock returns, past large decreases in managerial ownership are unrelated to current changes in Tobin's q but there is some evidence that past large increases in managerial ownership are positively related to current changes in Tobin's q. Because managers sell shares when a firm's stock is performing well, large contemporaneous decreases in managerial ownership are associated with increases in Tobin's q. We argue that our evidence is mostly inconsistent with existing theories and propose a managerial discretion theory of ownership consistent with our evidence.
ER  -