Additional evidence on equity ownership and corporate value

John J. McConnell
Henri Servaes
Purdue University, West Lafayette, IN 47907, USA
University of Chicago, Chicago, IL 60637, USA

Abstract
We investigate the relation between Tobin's Q and the structure of equity ownership for a sample of 1,173 firms for 1976 and 1,093 firms for 1986. We find a significant curvilinear relation between Q and the fraction of common stock owned by corporate insiders. The curve slopes upward until insider ownership reaches approximately 40% to 50% and then slopes slightly downward. We also find a significant positive relation between Q and the fraction of shares owned by institutional investors. The results are consistent with the hypothesis that corporate value is a function of the structure of equity ownership.

Journal of Financial Economics
Volume 27, Issue 2, October 1990, Pages 595-612

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