Management Ownership And Corporate Performance Empirical Research

Based on the endogenous perspective of Managerial Ownership and Corporate Performance, we use simultaneous equations and the three-stage least squares method to draw the following conclusions:First, on the whole, the managerial ownership have a very significant impact on firm performance of inverted "U"-type relationship. Second, on the whole, the level of managerial ownership was significantly positively impacted by the ROA, and significantly negatively impacted by Tobin’s Q. Third, whether it is state-owned enterprises or private enterprises, the proportion of managerial ownership have a very significant impact on ROA and Tobin’s Q of inverted "U" shaped relationship. The inflection points of ROA and Tobin’s Q of State-owned enterprises are ahead of the private enterprise, indicating that state-owned enterprises "trench effect" appear earlier; the steepness of the curves of the state-owned enterprises is higher than that of private enterprises, so the state-owned enterprises to implement the management stock ownership plan (such as the incentive effects of the equity incentive) may be more effective than private enterprises. Fourth, no matter the state-owned enterprises or private enterprises, the impact of ROA to managerial ownership are significantly positive; Tobin’s Q’s effect to managerial ownership of private enterprise is significantly negative, while the state-owned enterprises is significantly positive. Fifth,1introduce market competition dimension applicability to examine equity incentives for various industries and enterprises, empirical results show that, assuming the managerial ownership level in certain circumstances, the market is more competitive, the effect of management ownership to the enterprise performance’s improvement is more obvious; In contrast, when monopoly power rises to a certain extent, managerial ownership’s contribution to firm performance maybe will turn from a positive into a negative.Based on these results, we get the following policy recommendations:First, an appropriate use of equity incentive policy is to be regarded as effective means to improve state-owned enterprises’efficiency and performance. Second, it is necessary to regulate the use of incentive stock options of state-owned enterprises. This proposal is mainly due to the positive effect of Tobin’s Q to managerial ownership of state-owned enterprises, state-owned enterprises may be more motivated to launch the equity incentive, and then exercise when the market valuation is high, making the managerial ownership of state-owned enterprises is positively effected by Tobin’s Q. If vesting conditions of equity incentive are set too low, the equity incentive is actually equivalent to the transfer of benefits, the incentives of management to improve firm performance will be greatly reduced. Third, management stock ownership plan should be used with caution in state-owned enterprises in a duopoly industry. As previously analyzed, if the market competition is more tends to monopoly, the greater the incentive effect of managerial ownership tends to decline, when monopoly power rises to a certain extent, the contribution of managerial ownership on firm performance might change to negative, so that even if using of equity incentive, its effect may become limited or even become detrimental to corporate performance, and this damage effect is more significant than private firms.