Article1988

INVESTMENT PERFORMANCE OF COMMON STOCKS IN RELATION TO INSIDER OWNERSHIP

Wi Saeng Kim · Jae Won Lee · Jack Clark Francis

45 citations0/0 files storedFinancial Review

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

ABSTRACT In this paper, the authors empirically examine whether corporations with high degrees of insider ownership enjoy superior returns compared with firms with more diffuse ownership. In addition, the authors evaluate the effects of insider ownership on security returns in relations to the well‐known effects of size and earnings yield (or price‐earnings) ratios. Results indicate that, in addition to Basu's price‐earnings effect, insider ownership is a new statistically significant variable that is associated with abnormal returns. This return anomaly might occur because the market pays an inadequate price for top managements' equity ownership, a firm‐specific fundamental variable that has a theoretical foundation in agency theory.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1981The relationship between return and market value of common stocks 1981Risk Reduction as a Managerial Motive for Conglomerate Mergers 1977INVESTMENT PERFORMANCE OF COMMON STOCKS IN RELATION TO THEIR PRICE‐EARNINGS RATIOS: A TEST OF THE EFFICIENT MARKET HYPOTHESIS 1982GROWTH, BETA AND AGENCY COSTS AS DETERMINANTS OF DIVIDEND PAYOUT RATIOS 1983The relationship between earnings' yield, market value and return for NYSE common stocks 1981Misspecification of capital asset pricing 1978Anomalies in relationships between securities' yields and yield-surrogates

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