Do Managers Ownership Concentration Affect Firms ' Investment Policy?

First, Mr. Ellison is a successful businessman. Starting in the 70’s, he along with two partners and $2,000 started a company. They named the company Software Development Laboratories. This company underwent two name changes until in 1982. It was renamed after its flagship product, Oracle Systems. Mr. Ellison was named on Forbes’ 2010 list of billionaires, with a net

Literature includes CEO cash compensation as the proxy for the CEO’s level of risk aversion (Rogers, 2002; Nam et al., 2003; Coles et al., 2006). CEOs with higher cash compensation are more likely to become more risk avers. CEO’s with high cash compensation will seek to avoid risk. I measure cash compensation as the natural logarithm of the salary and the natural logarithm bonus. Following existing literature (e.g., Guay, 1999; Rajgopal and Shevlin, 2002) the sensitivity of CEO wealth to stock price is also included as an additional control variables for CEO risk aversion in the risk-taking incentive model.

Stout also raises the idea that shareholders are not a hive mind with the same thoughts but instead are unique individuals whom only hold stock in the company and do not run it behind the scenes. Some shareholders only own this stock to sell when prices are high while others have a long-term interest and want to see the company succeed. Some investors worry how the company's outcome will affect their other investments. Others may be unconcerned with the companies issue and have no other investments. Finally, some investors may be willing to sacrifice profit to ensure to corporation acts in an ethical way, while other may pursue profit regardless of any moral

It follows that aggregate pay and risk can be normally corresponded even in an established classical principle-agent model with exogenous firm risk where CEOs actualise the ideal exertion for the benefit of shareholders and where entrenchment is truant. To put it plainly, the outcomes of this research propose that firm risk is by all accounts a first-arrange determinant in the cross-segment of which firms repay their managers profoundly. This option account accentuates that managers’ compensation must be adjusted for working at high-risk firms. The entrenchment story for the most part suggests that enhancing administration and lessening the wedge between the interest of administration and shareholders would have restricted danger in the framework, and maybe even have maintained a strategic distance from the financial crisis (Cheng and Jose

The main benefit of a hedge fund is that an investor can make higher returns with a hedge fund compared to the market returns by using leverage from taking a short position in certain stocks.  It is possible for the return for hedge funds to be maintained consistent regardless of whether the market is rising or falling.  On average, a hedge fund will typically carry lower risk than the market. However, given the long/short strategy of hedge funds, there still exists a risk for

Most firms hedge at least some of their risks. Hedging can take two basic forms—namely, natural hedging and hedging by means of derivative instruments. The use of derivatives as hedges has expanded greatly in recent years.

This is an equity fund manager tasked with the responsibility of managing a portfolio. The portfolio comprises of largest UK stocks and thus bases the FTSE100 index (Battalio and Schultz 2011, Pp 45). There is much concern that sharp correction in equities might take place in the next 3 month. The main purpose of this report is to present the hedging choices that they have.

The empirical analysis shows that the degree of ownership concentration has a significant impact on the performance of the listed banks, and the degree of ownership concentration has a positive effect on the performance of the banks. The reason may be that China 's current market mechanism is not fully mature, the protection of small investors ' rights and interests of the regulatory system is not yet perfect, especially the implementation of the intensity of the need to be strengthened. Different equity models have the relative institutional environment. Most of the dispersed ownership mode and perfect investor protection legal system, in the market mechanism and legal system to protect

In other words, managers with shorter shareholder horizons, and those whose assets are more difficult to value, should cater more. To

This study looks for evidence that the capital structure decision of firms with powerful CEOs has a negative effect of corporate performance.

With equity holdings around 50%, managers will have implicit control of their company, but still do not have objectives completely aligned to external shareholders. Only at very high levels of managerial holdings are incentives akin to other shareholders. When this model is applied to a large sample of firms incorporated in the UK, managerial ownership is seen to have a significant impact on corporate value. This relationship is endogenous, and consistent with Cho (1998) and Himmelberg et al. (1999), corporate value has a corresponding effect on managerial holdings. We also find that although ownership levels are affected by firm level investment, there is no evidence of the reverse occurring. In the next section we outline our model of the managerial ownership–corporate value relationship. We present empirical results in Section 3 and conclude in Section 4.

Finance literature documents tendency of CEOs to overinvest above the optimal levels of investment. Jensen (1986, 1993) claims that empire-building CEOs will spend all available resources in investment projects even when it’s not optimal to do so. While Stein (1997) states that the private benefits, CEOs are deriving, increase with the level of resources under their control. Therefore, overinvesting will maximize the private benefits of those CEOs. Another relevant factor that we should consider is managers’ overconfidence; CEOs tend to be overconfident about the prospects of their firms and therefore overinvest as they believe that this optimal decision will maximize shareholders wealth (Heaton 2002). On the other hand, Stulz point out that firms will underinvest when cash flow is low. Due to the information asymmetry between CEOs and shareholders, the

The informational imbalance between the investors and managers could be redressed with the help of disclosure regulations and it also help to avoid divergence of interest between the owners’ and the managers which empower the owners to take more active position in decision making and monitoring the managers. Sargent, M., A, (1987)

The main methods of reducing the risks associated with investments in securities based on portfolio formation are:

There has been a lot of research done dealing with the issue of ownership and firm performance since Berle and Means (1932, with critical discussions on how to align the manager’s interests to that of the shareholders. Berle and Means (1932) hypothesised that firms that are controlled by the management should be less profitable than owner controlled firms. This is known as the “incentive alignment theory” which states that the more equity a manager owns the more inclined he or she is to increase performance because it means better alignment of the monetary incentives between the manager and other equity owners according to Jensen and Meckling (1976). The “Takeover premium theory” also states that that more equity ownership by the manager should improve performance as managers that own a large portion of the stock are more capable to fight takeover bids, therefore increasing the chances that a higher takeover premium will have to be paid, Stulz (1988).