CEO Ownership and Shareholder Return

Abstract: We analyze the effect of CEO ownership on shareholder return. The current debate is two-fold stemming in part from the academic side suggesting that ownership as a percentage of company is an excellent tool in corporate governance to achieve superior returns, and in part from the journalistic debate in Sweden focusing on Pilotskolan where the absolute value of CEO ownership is the relevant factor in achieving superior returns. We test both for relative ownership and absolute value of ownership. Our sample consists of 52 companies on the Stockholm Large Cap List between 2002 and 2006, totaling 260 observations. We find a significant positive relationship between returns and CEO ownership below ownership of 3 percent, but no such relation for larger ownership. In absolute value terms, we find no statistically significant relation.