Resource title

The Direction of Causality between Insider Ownership and Market Valuation

Resource image

image for OpenScout resource :: The Direction of Causality between Insider Ownership and Market Valuation

Resource description

The causal relationship between insider ownership and market valuation is tested on adatabase of the largest EU and US companies. Using a Granger causality test insiderownership (measured by the fraction of closely held shares) is found to have a negative effecton market valuation (measured as the simple Tobin's Q ratio). And market valuation is foundto have a negative effect on insider ownership. Consistent with an overall non-linearrelationship as hypothesised by Morck et al. (1988) and Stultz (1988), the negative effectfrom insider ownership to performance is found to be significant only for companies withhigh initial levels of insider ownership, but insignificant for companies with low initialconcentration levels. Furthermore, the effect on market valuation turns out to depend onsystem affiliation: it is only significant in continental Europe where average insiderownership is much higher than in the Anglo-American world (UK and US).

Resource author

Torben Pedersen, Steen Thomsen, Hans Kurt Kvist

Resource publisher

Resource publish date

Resource language

eng

Resource content type

application/pdf

Resource resource URL

http://hdl.handle.net/10398/6900

Resource license

Check the according license before adaptation. When adapting give credits to the original author.