Identifying the Effect of Managerial Control on Firm Performance

Identifying the Effect of Managerial Control on Firm Performance

Renee Adams, Joao Santos

Series number :

Serial Number: 
101/2005

Date posted :

November 01 2005

Last revised :

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Keywords

  • Managerial control • 
  • voting rights • 
  • Performance measurement • 
  • Trust investments

Using a unique sample, we attempt to identify the consequence of the separation between inside ownership and control for firm performance. We exploit the fact that banking institutions may hold their own shares in trust to construct a clean measure of the wedge between inside voting control and cash flow rights.

These shares provide managers with no monetary incentives, since their dividends accrue to trust beneficiaries. 

However, managers may have the authority to vote these shares. Contrary to the belief that managerial control is purely detrimental, we find that it has positive effects on performance over at least some range.

Published in

Published in: 
Publication Title: 
Journal of Accounting and Economics
Description: 
41, 55-85, 2006

Authors

Real name: 
Joao Santos