Managerial ownership and incentive alignment [thesis]

Phillip James Quinn
I have received an incredible amount of support during my doctoral studies. My dissertation chairs, Dan Collins and Paul Hribar, have provided me with more of their time, guidance, patience, and support than I ever could have asked for. I will never be able to thank Dan and Paul enough. I also want to thank the other members of thesis committee: Erik Lie, Dave Mauer, and Rick Mergenthaler. Erik, Dave, and Rick improved my dissertation significantly with their many helpful suggestions. Numerous
more » ... gestions. Numerous faculty and graduate students have aided my academic development, and I appreciate all the help that I have received from everyone. I am especially grateful to Ciao-Wei Chen and Jaewoo Kim for their assistance, encouragement, and friendship throughout my studies. Finally, making it into and through graduate school would not be possible without the unending love and support from my family. ii ABSTRACT Mandatory stock ownership plans require executives to hold a minimum level of stock. I exploit these changes in managerial stock ownership to examine the relation between managerial ownership and manager-shareholder incentive alignment. In contrast to prior work that suggests equity incentives induce opportunistic managerial behavior, I find earnings management declines following the adoption of mandatory stock ownership plans relative to a propensity-matched control sample. I also posit and find a reduction in bid-ask spreads following plan adoptions, consistent with manager-shareholder incentive alignment improving market liquidity and decreasing information asymmetry. These findings are consistent with boards of directors contracting with managers to reduce the agency costs of equity. iii
doi:10.17077/etd.fflqzckg fatcat:w2fr564cnffwfaaxbd65xhcu3e