Research

A Reduced Form Coefficients Analysis of Executive Ownership, Corporate Value, and Executive Compensation

Most simultaneous equations studies analyze the coefficients from the structural forms of the models, which provide estimates of the direct effects of independent variables on the dependent variables in each equation, but ignore the indirect effects these independent variables have on dependent variables in other equations. This paper modifies the work of Chung and Pruitt (1996) by extending the model to include board composition and institutional ownership variables and then estimating the structural and derived reduced form coefficients for the extended model. The signs and significance of the reduced form coefficients differ in several material respects from the results of the structural form coefficient analysis, which suggests that analysis of only the structural form coefficients is incorrect and potentially misleading.

Publication Information
Article Title: A Reduced Form Coefficients Analysis of Executive Ownership, Corporate Value, and Executive Compensation
Journal: Financial Review (Aug, 2003)
Author(s): Weber, Marsha;  Dudney, Donna
Researcher Information
    
Dudney, Donna
Dudney, Donna
Associate Dean of Undergraduate Curriculum and Programs
Expertise:
  • Financial Institutions
  • Financial Markets & Investing
  • Managerial Economics
Finance
CoB 301 G
P.O. Box 880490
University of Nebraska-Lincoln
Lincoln, NE 68588-0490, USA
Phone: (402) 472-5695
Fax: (402) 472-5180
ddudney@unl.edu