The Effect Of Managerial Ownership On Corporate Future Performance

As a long-term incentive method to alleviate principal-agent problem, the incentive effect of managerial ownership has been the focus of theoretical and physical research. The increasing number of listed companies began to implement managerial ownership incentive plan since China adopted non-tradable shares reform, hoping to de-escalate the conflict of interest between managers and shareholders to reduce agency costs and improve corporate performance. However, different scholars have different opinions on the relationship between the proportion of managerial ownership and corporate performance. Therefore, whether managerial ownership can play the role of incentive and whether there are other factors that can moderate the relationship between the proportion of managerial ownership and corporate performance are worthy of discussion and concern.After full analysis of agency theory and asymmetric information theory, this paper argues managerial ownership can partially alleviate principal-agent problems, reduce short-sighted behavior of executives and improve the long-term performance of enterprises. But managerial ownership can’t eliminate principal-agent problem completely and enterprises lack the restraint mechanisms for managerial ownership, so that the motivation of earnings management still exist. Managers may take advantage of asymmetric information to manage earnings, causing damage to the corporate future performance and weakening the positive effect of managerial ownership on the corporate future performance. Therefore, applying data of 4920 A-share companies listed on Shanghai and Shenzhen Exchange from 2006 to 2014, this paper uses OLS regression model to analyze the relationship between the proportion of managerial ownership and corporate future performance and the moderating effects of real earnings management on the relationship between the proportion of managerial ownership and corporate future performance. The research shows that:(1) the proportion of managerial ownership holding a significant positive impact on the corporate future performance, that is, the higher the proportion of managerial ownership, the better the future performance of the enterprises, confirming the incentive effect of managerial ownership on the corporate future performance;(2)the real earnings management has a negative moderating effects on the relationship between the proportion of managerial ownership and corporate future performance, which means that managerial ownership does not completely eliminate principal-agent problem, and there are still real earnings management behavior of enterprise managers, which will weakening the positive effect of the proportion of managerial ownership on the corporate future performance. Hoping that through the paper’s analysis, companies could re-examine the incentive effects of the proportion of managerial ownership, implementing managerial ownership measure properly and developing appropriate restraint mechanisms for managerial ownership at the same time to constrain the real earnings behavior of managers and reduce the damage to the corporate future performance.