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Conventional studies discuss the effect of managerial ownership on firm performance and have conflicting findings. This paper seeks to find divergent mutual effects existing between managerial ownership and firm performance.

The three‐stage‐least squares method and simultaneous equation model is adopted to obtain more efficient coefficient estimation. Both firm‐year observations and company mean variables are used to capture the structural relation and mutual effects between ownership structure and firm performance.

This paper finds divergent mutual effects existing. In a diffused ownership structure, better firm performance may induce management to hold more stockholding. Management with mid‐range of stockholdings has a positive effect on firm performance but not vice versa. For highly concentrated ownership structure, a negative mutual effect exists.

These findings provide the investment purpose as an alternative explanation for insiders' stockholding that agrees with investors' risk aversion attitude in practice. For highly concentrated ownership, possible management entrenchment behavior resulting from dominant control power should be carefully considered and monitored to protect minority shareholders.

This paper provides new evidence that complicated mutual effects may exist between managerial ownership and firm performance. It offers insights for both investors and researchers in corporate governance.

Individuals tend to simplify a complex portfolio decision problem into several manageable dimensions, each of which can frame their perception of risk.We check this view by studying the effect of investment horizons on households’ portfolio decisions. Using the Survey of Consumer Finances (SCF) data, we find that households allocate more of their wealth in stocks if they report longer planning horizons. The existence of foreseeable expenditure significantly changes the dependence of risky stock investment on the planning horizon.We decompose the reported planning horizon into an objective part and a subjective mental accounting part, and find that the mental accounting part has a greater effect on household portfolio choice. This is consistent with the argument that individuals make investment decisions based on the horizon at which the risk is perceived rather than the horizon at which the investment reward or cash is needed.

The issue of subsidized acquisition of food stocks for food security purposes has become a contentious issue at the World Trade Organization (WTO) due to their potential impact on international trade. The purpose of this paper is to provide estimates of the effects on trade of stockholding programs designed specifically to meet a food security objective.

A spatial-temporal trade model is developed and then the effects of stockholding policies which satisfy food security goals are simulated and compared to the case where stockholdings are not allowed.

The results suggest that if stockholding policies that satisfy food security goals are allowed in the case of all importing countries and all G-33 developing countries trade will increase significantly during the stock acquisition phase but will have a negative impact on trade during stock disposal. If stockholding policies are restricted to small high food security risk countries, however, the impacts on trade would not be large enough to be of international concern.

The results suggests that a permanent solution at the WTO might lie in exemptions for small high food security risk countries rather than a one size fits all rule applied to all developing countries. Trade policy makers have been charged with finding a permanent solution to the issue of subsidized public stockholdings for food security purposes but have been hampered, in part, by a dearth of empirical estimates of the effect of such stockholdings on trade. This paper informs the negotiations.

Prior research (e.g Holthausen and Leftwich, 1986) has found that firms’ stock prices react negatively to announcements of downgrades of their bond ratings. Our study examines whether stock prices react negatively to downgrades because the rating agency conveys adverse private information about the firm through the downgrade (the information provision hypothesis) and/or because the downgrade imposes significant costs on the firm (the cost imposition hypothesis). The results of a cross‐sectional model support both hypotheses. Specifically, we find that firms’ stock returns are positively related with their institutional stockholdings and negatively related with their debt‐to‐equity ratios. This suggests that the rating agency is an important information provider for firms with low institutional stockholdings, and that the downgrades significantly impact firms’ borrowing costs.

The control role of the Board of Directors is aimed at monitoring the decisions and actions undertaken by managers in order to protect stockholders’ interests. Considerable theoretical and empirical research has analyzed whether directors’ behavior is consistent with their fiduciary responsibility, but this research has reported inconsistent findings. This paper offers a comprehensive review of both theoretical and empirical literature on the control role of the board and suggests several guidelines for future research.

The purpose of this paper is to examine whether socio-economic factors influence portfolio composition of individual investors investing in stocks for the first time and how these factors relate to stock portfolio performance.

The study uses cross-sectional time-series analysis to examine a unique and detailed data set of Swedish stockholdings.

The results show that first-time investors do not hold diversified portfolios. They experience high market risk and, on average, underperform more experienced investors. Males have higher unsystematic risk in their portfolios than females and older investors have more diversified portfolios compared to younger investors.

The results show that individual investors should improve their insights by incorporating risk when investing in stocks.

Given the results of this paper, the movement from defined benefit to defined contribution pension schemes in many countries raises the issue of the need to better understand and monitor the risks in stock portfolios.

This study provides insights into whether socio-economic factors influence portfolio composition, the extent to which socio-economic factors and portfolio characteristics relate to portfolio returns, and whether portfolio performance between first-time and more experienced investors differs.

Following the recognition of the separation of ownership and control in the large firm espoused by Berle and Means (1932), a debate ensued on the possible effect of such separation on the value/or performance of the large firm. This controversy was evidenced in both theoretical and empirical studies on the relation between the allocation of shares among managers and non‐managers, and corporate value/or performance (Jensen and Meckling, 1976; Stulz, 1988; Morck, Schleifer and Vishny, 1988; Demsetz and Lehn, 1985; Holderness and Sheehan, 1985; Hermalin and Weisbad, 1987; and Riahi‐Belkaoui and Pavlik, 1992). Empirical studies focused specifically on the relationship between Tobin Q or accounting‐based profit measures of performance, and equity ownership, yielding mixed results.

This study examined the relationship between executive tenure and selected company characteristics for 196 US corporations. Tenure was found to be negatively related to both unrelated and related diversification strategies, and positively related to firm performance and both types of ownership structure: stock concentration and management stockholdings.

The study developed and tested a model that attempts to describe the influence of ownership structure, diversification strategy, firm size and firm performance on CEO compensation. Results based on data from a cross‐sectional set of 216 Fortune 500 firms suggested that firm size, ownership structure and diversification strategy affect CEO compensation through the mediating effects of firm performance.

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.