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Outlines previous research on the role of executive compensation contracts in reducing conflicts of interest between ownership and control; and develops hypotheses on the effects of chief executive officer stock options and share ownership on subsequent firm performance. Suggests that since options do not create losses when share prices decline, they encourage more risk taking than share ownership. Explains the methodology used to test these ideas on 1994‐1996 data for a sample of large US firms and presents the results, which suggest that both stock options and share ownership are positively linked to later firm performance but that the link is stronger for ownership in high risk situations, but lower performance where risk is high. Considers the implications for corporate governance and consistency with other research; and calls for further research.

This study aims to examine the impact of institutional investors and their classes on the stock return volatility of an emerging market. The paper also determines the moderating role of firm size, crisis and turnover on such relationships.

The study covers nonfinancial companies of the Bombay Stock Exchange-100 index that are listed during the study period. The study uses fixed effects and systematic generalized method of moments estimators to look over the association between institutional investors and firms’ stock return volatility.

The study provides evidence that institutional investors destabilize the Indian stock market. It indicates that institutional investors do not engage in management activities; they earn short-term gains depending on information efficiency. Pressure-insensitive institutional investors have a significant positive relation with stock return volatility, while pressure-sensitive institutional investors do not. The study also reflects that pressure-sensitive institutional investors are underweighted in India, which jointly represents an insignificant nonlinear association between institutional ownership and stocks’ volatility. Furthermore, outcomes reveal that the intersection effect of the crisis, firm size and turnover is positively and significantly related to such relationships.

The outcomes encourage initiatives that keep track of institutional investors in the Indian stock market. To control the destabilizing effect of pressure-insensitive institutional investors, regulators should follow strict regulations on their trading patterns. Moreover, it guides the potential researchers that they should also take into account the impact of other classes of ownership structure or what type of ownership can help in stabilizing or destabilizing the Indian stock market.

Abundant literature studies the relationship between institutional ownership and firm performance in the Indian context. From the standpoint of making management decisions, the return and volatility of stock returns are both different aspects. However, this study examines the effect of institutional ownership and its groups on the volatility of stock return using the panel data estimator, which was previously not discussed in the literature.

This paper investigates the relationship between institutional ownership and idiosyncratic volatility in Chinese and the USA stock markets and explores the potential explanations.

In this paper, the authors use the panel data regressions and the dynamic tests of two-way Granger causality in the panel VAR model to examine the relationship between institutional ownership and idiosyncratic volatility in Chinese and the USA stock markets.

The authors find that the institutional ownership in the Chinese (the USA) stock market is significantly and positively (negatively) related to idiosyncratic volatility through various tests. This paper indicates that institutional investors in the USA are more prudent and risk-averse, while the Chinese institutional investors are not because of high risk-bearing capacity.

This paper deepens the authors’ understanding on the relationship between institutional ownership and idiosyncratic volatility and in the USA and the Chinese stock markets. This paper explains the opposite relationships between institutional ownership and idiosyncratic volatility in the stock markets in China and USA.

The purpose of this paper is to investigate the contrasting moderating effect of a firm’s exploration on the relationship between the two types of long-term incentives (stock options/stock ownership) for the chief executive officers and a firm’s long-term performance. Even though the two types of incentives are designed to improve long-term performance, the degrees of impact on long-term performance differ. Based on behavioral agency theory, this study theoretically and empirically examines the role of a firm’s exploration on the above relationship.

This study used three archival sources to obtain data on stock options, stock ownership, patents and exploration, financial measures, and others. Based on a sample of 1,963 firms in various industries from 1995 to 2006, this study tested the moderating effect of a firm’s exploration on the relationship between stock options/ownership and a firm’s performance.

This study reveals the contrasting moderating effect of a firm’s exploration on the relationship between stock options/ownership and a firm’s long-term performance: a positive moderating effect on the relationship between stock options and performance and a negative moderating effect on the relationship between stock ownership and performance. In addition, empirical evidence was added on the inverted U-shaped relationship between stock ownership and a firm’s long-term performance.

There is little research on a firm’s internal characteristics that strengthen or weaken the effects of stock options and stock ownership on firm performance. This study demonstrates the differential moderating effects of exploration on the relationship between stock options/stock ownership and long-term performance. Such effects of exploration come from the different risk features of stock options and stock ownership. The key implication is that stock options could be more effective than stock ownership to enhance a firm’s long-term performance when a firm has a strong exploration orientation.

The purpose of this paper is to answer the question: What happens to the outcomes of pay dispersion when the employees own stock in their own company?

The data set consisted of over 20,000 employee surveys. Pay dispersion was measured with the Gini coefficient. The outcome variables were attitudes and behaviors with numerous controls. The moderation effect of employee ownership was investigated at the individual and group level using multilevel regression analysis.

Most hypothesized outcomes did not yield statistically significant results. The results that were statistically significant had two patterns: first, higher pay dispersion was consistently associated with improved attitudes and behaviors; and second, employee ownership moderated the outcomes of pay dispersion for certain outcomes and job types (e.g. perceptions of company fairness among administrative support personnel, or absenteeism and production personnel). There was no evidence to support a link between pay dispersion and attitudes across job types (vertical), only within job types (horizontal).

All the data were self-reported in surveys. Attitudes were measured with single items rather than validated scales. The data were cross-sectional, so no causality can be inferred.

While both higher pay dispersion and employee ownership can motivate employees, the interaction between them can be negative, especially in a cooperative environment. Consideration should be given to this when designing compensation packages.

There was a surprisingly strong link between higher pay differentials and improved attitudes, suggesting that the opportunity for higher pay is more influential than any feelings of inequity.

The effect of employee ownership on the outcomes of pay dispersion has never been investigated. This should be valuable given how widely higher pay is used to attract, retain and motivate employees (leading to pay dispersion) as well as how increasingly popular employee ownership is becoming.

Past research has found employee ownership to be linked to better attitudes and behaviors. We investigate three possible mechanisms: (a) a selection effect – employees who buy stock in their own company may have better attitudes to begin with; (b) a status effect – employees who have any amount of employee ownership may have better attitudes; and (c) a size of stake effect – employee attitudes and behaviors may be influenced by the size of their employee ownership stake. We used a rich database of over 40,000 employee surveys from one large multinational company and 13 other companies. We find some support for all three mechanisms. Selection effects are indicated by several positive relationships between attitudes and stock that is bought by the employees rather than being granted by the employer. Status and size of stake effects are indicated by several positive relationships between attitudes and stock that is granted by the employer, particularly when the employee ownership is accompanied by high-performance work policies. While dividing employee ownership into bought or granted stock sheds light on the selection issue, the data are cross-sectional so selection and causality cannot be firmly established. There is need for further research on selection versus causality in examining the effects of employee ownership. The results indicate that companies may improve employee attitudes and behaviors of people by granting them stock and by having opportunities for employees to purchase stock. Even the results pointing to selection effects, however, can be important for companies, since offering stock ownership opportunities to employees may be an effective way to identify which employees are most committed to the firm and are likely to become good corporate citizens.

The purpose of the study is to examine the effect of managerial stock ownership on the relationship between material internal control weaknesses (ICW) and audit fees.

The paper uses multivariate regression analyses on a sample of 1,578 ICW and 1,578 pair-matched (based on both propensity score and managerial stock ownership) non-ICW firm observations for a period from 2004 to 2010 to investigate how managerial incentive at various stock ownership levels impacts the relationship between material ICW and audit fees.

For the firms with low managerial stock ownership (up to 5 per cent stockholdings), the authors find no significant effect of managerial ownership on the positive relationship between audit fees and ICW. However, the impact of managerial stock ownership on the relationship between ICW and audit fees is significantly positive when managerial ownership is medium, i.e. more than 5 per cent and less than or equal to 25 per cent stockholdings, and the managerial ownership effect is even higher when managerial stock ownership is high, i.e. more than 25 per cent stockholdings. The result is especially robust for the ICW firms with high managerial stock ownership (i.e. where managers hold more than 25 per cent equity stake in the firms). The additional analyses further show that this managerial ownership effect is more pronounced when the firms suffer from company-level material control weaknesses that have pervasive negative effect on financial reporting quality.

The results imply that in a low managerial ownership firms with substantial misalignment between manager and shareholder incentives, managerial stock ownership has little effect on the ICW and audit fee relationship. But when managers’ ownership interest is at a high level, they are more prone to purchase higher-quality audit service to reduce the risk of financial misstatements due to material ICW, which results in higher audit fees. The results add to the audit fee literature by suggesting that managerial incentive at various ownership levels is a critical governance factor that impacts auditor’s fee structure especially when higher reporting risk exists due to material ICW.

Prior literature documents that there is some relationship between managerial attributes and earnings quality; however, there is no substantive empirical evidence on the effect of managerial stock ownership on audit pricing when client companies face higher risk of financial misreporting as a result of material ICW. In this study, the authors seek answers to these empirical questions and fill the gap in the literature.

The purpose of the paper is to examine the association between the corporate ownership characteristics and the timely remediation of internal control weaknesses over financial reporting under Section 404 of the Sarbanes‐Oxley Act (SOX) of 2002.

The paper employs both ordered and binary logistic regression models for a sample of 695 US firms who reported internal control weaknesses for the first time, pursuant to SOX Section 404, and evaluates the impact of the stock ownership characteristics on the timeliness in remediation of their control weaknesses.

The test results show that the corporate ownership characteristics, as a part of governance mechanism, play an incrementally critical role to influence firms' decisions to promptly remediate their internal control problems and improve the reliability of financial information. In addition, it was also found that a corporate board independent of its CEO is effective in monitoring timely remediation of control problems. Sub‐sample analyses for the company‐level and account‐specific internal control weaknesses produce similar results in support of the effect of corporate stock ownership characteristics on the timely remediation of internal control weaknesses.

First, the paper adds to the literature by demonstrating the incremental effect of the stock ownership characteristics on a firm's timeliness in remediation of control weaknesses, even after controlling the effect of audit committee and board characteristics in the analysis. Second, the paper shows that even in the post‐SOX years with enhanced regulatory oversight in corporate affairs, the effect of corporate ownership attributes as a part of governance is incrementally observable in a situation that calls for prompt managerial action to ensure the reliability of financial information. Third, for the first time, the study makes a separate detailed analysis on the association between the stock ownership attributes and the remediation of company‐level and account‐specific control weaknesses. The results provide valuable insights into the ownership governance effect on the remediation of the two types of control weaknesses that have different rigor, auditability (more or less auditable), and effects (pervasive or non‐pervasive) on financial reporting quality. Fourth, the study further enhances one's understanding of several important governance factors that help achieve a sound financial reporting system and restore investors' confidence in the system.

The purpose of this paper is to examine the relationships between CEO ownership, stock option compensation, and risk taking. The authors include important CEO power variables as moderators.

The paper uses a longitudinal regression analysis. In addition, the paper includes interactional plots for further interpretation.

The results indicate that CEO ownership reduces risk taking, while there is a partial support that stock options increase risk taking. CEO tenure is a powerful moderator that decreases risk taking in both CEO ownership and CEO stock option scenarios. Board independence, counter to the hypothesis in this paper, may encourage risk taking.

The findings in this paper provide support for the inclusion of CEO power variables in CEO compensation studies. However, the study examines large publicly traded companies; thus, all findings may not be applicable to small- and medium-sized companies.

Scholars have encouraged more complex CEO compensation models and the authors have examined both main effect and interaction models.

This study aims to elaborate on how firms manage research and development (R&D) activities by examining the relationship between ownership concentration and corporate R&D investment, as well as the moderating role of stock options in this relationship.

The study sample comprised 354 Chinese listed firms from 2011 to 2019, and the Tobit model and the system GMM test are used to check robustness.

The results reveal that ownership concentration and R&D investment have an inverted U-shaped relationship. In the presence of stock options, this inverted U-shaped relationship is significantly weaker.

The results have important managerial implications for firms that aim to grant stock options and improve the impact of ownership concentration on R&D investment strategies.