Abstract
This study examines how firm efficiency varies according to managerial ownership. Prior studies on how managerial ownership affects firm value provide inconsistent results. Although firm value is determined by various factors, this study tries to directly link managerial ownership to operating efficiency. It finds evidence consistent with the incentive alignment hypothesis: managerial ownership is positively associated with firm efficiency. It also finds that foreign investors enhance the association between managerial ownership and firm efficiency, whereas an affiliation with large business conglomerates in Korea (chaebols) lowers this association. It contributes to the existing literature by linking managerial ownership to firm efficiency, which we believe is an underlying indicator of the effect of managerial ownership on managers' behaviour in alignment/misalignment with firm value. It also helps interested parties better understand the dynamic roles among management and foreign ownership, and chaebols.
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