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Managerial share ownership and operating performance : do independent and executive directors have different incentives?

journal contribution
posted on 2014-02-01, 00:00 authored by Arifur KhanArifur Khan, P Mather, B Balachandran
We investigate the relationship between managerial share ownership (MSO) and earnings as a measure of operating performance in Australia. To mitigate potential earnings management, we also use discretionary accrual adjusted earnings as an alternative measure of performance. We document a negative relation between MSO and performance followed by a positive relation. We suggest that these unique results are an artefact of certain Australian institutional features and imply that the ownership–performance relation is context-specific, with the wider corporate governance systems influencing the theorised incentive effects. We also posit that executive directors and independent directors have different ownership–performance incentives. Our results are consistent with this proposition and suggest that independent directors may be immune to the theorised incentive alignment or entrenchment effects associated with share ownership.

History

Journal

Australian journal of management

Volume

39

Issue

1

Pagination

47 - 71

Publisher

Sage Publications

Location

London, England

ISSN

0312-8962

eISSN

1327-2020

Language

eng

Publication classification

C1 Refereed article in a scholarly journal

Copyright notice

2012, Sage Publishing