October 2000
A. Sinan Cebenoyan, Elizabeth S. Cooperman and Charles A. Register
ABSTRACT
It has long been accepted that managerial stock ownership, beyond some range of possible entrenchment, can be an
effective means of aligning the interests of professional managers with those of a firm’s outside owners to the
benefit of firm performance. In this paper, we offer evidence on the effectiveness of managerial stock ownership
as a corporate control device by analyzing the behavior of 81 thrift institutions operating over the six-year period,
1989-1994. Based on the estimation of stochastic cost and profit frontiers, as well as other performance measures,
our results suggest that managerial stock ownership provides an effective corporate control device. However, this
device is only effective as managerial holdings surpass about 33% of outstanding shares for improvements in cost
efficiency and about 40% for profit efficiency.
Subject: Banking
Classification: Empirical
A. Sinan Cebenoyan
Institution: Stern School of Business, New York University
Email: acebenoy@stern.nyu.edu
Telephone: (212) 998-0426
Homepage: http://www.stern.nyu.edu/~acebenoy/
Elizabeth S. Cooperman
Institution: University of Colorado at Denver
Email: ecooperm@carbon.cudenver.edu
Telephone: (303) 556-5948
Charles A. Register
Institution: Florida Atlantic University
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