Examination of the Relationship Between Executive Ownership and Firm Performance Based on Evidence from Chinese Publicly Listed Companies

Abstract

Nowadays, increasing attention has been placed on monitoring managers on their contribution to firm performance. It is important to design the correct compensation contract to motivate the best behaviors. This study examines the impact of executive ownership on firm performance through OLS and fixed effects model, based on a sample of Chinese listed companies from 2015 to 2018. The time period is selected to avoid the disruptions from the COVID-19 pandemic. The results suggest that higher executive ownership can improve market performance such as stock return but does not have significant influences on accounting performance such as return on equity. This is likely due to the fact hat higher executive ownership is a positive signal to the market that the managers believe their companies stocks are undervalued and thus boost market confidence.