Aligning ownership and control

Abstract: Abstract Title Aligning ownership and control Seminar date 15 January 2021 Course Bachelor's Thesis in Corporate Finance (FEKH89) Authors Alexander Bjarte, Jakob Gerby, Melker Melin Thesis Advisor Anamaria Cociorva Key words Insider Ownership, Financial Performance, ROA, Tobin’s Q, Asset Allocation, Decision Making Purpose The aim of this study is to investigate whether equity ownership amongst the decision making management of a firm is positive for financial performance. Methodology In order to achieve the purpose of the study, a quantitative method with a deductive approach was used. Theoretical perspective The study relies on previous research on the relationship between ownership and financial performance. The Agent-principal relationship lays the foundation for the study. Agency conflicts and information asymmetry explaining how this relationship becomes problematic when ownership and control is divided. Signaling and managerial incentives explains how principal-agency conflicts could be mitigated through insider ownership. Empirical foundation The data consist of ownership -and accounting data for 325 firms listed on Stockholm Stock Exchange, small, -mid -and Large Cap. Data is collected from the Holdings database and Bloomberg. Results The results show a positive coefficient for insider ownership with statistical significance to financial performance measured as ROA. For Tobin's Q as dependent variable a positive coefficient for insider ownership is found but is not statistically significant.