EXECUTIVE STOCK OWNERSHIP AND PERFORMANCE - TRACKING FAINT TRACES

We examine the relation between managers' financial interests and firm performance. Since the relation could go in either direction, we cast the analysis in a simultaneous equations framework. For firms involve d in acquisitions, we find that acquisition performance and Tobin's Q ratios affect the size of managers stockholdings. We find no evidence, however, that larger stockholdings lead to better performance. Perhap s management is effectively disciplined by competition in product and labor markets. Alternatively, it may not be necessary for top executiv es to own stock to be residual claimants. And finally, higher ownershi p might multiply the opportunities to appropriate corporate wealth.