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Does increasing managerial ownership stakes improve firm performance? (Select all the choices that apply.) A. No. As Demsetz and Lehn (1985) argue, there is no
Does increasing managerial ownership stakes improve firm performance? (Select all the choices that apply.) A. No. As Demsetz and Lehn (1985) argue, there is no reason to expect a simple relation between ownership and performance. There are many dimensions to the corporate governance system and a one-size-fits-all approach is too simplistic; the correct ownership level for one firm may not be the correct level for another. B. Yes. As Demsetz and Lehn (1985) argue, there is a simple relation between ownership and performance. Therefore, increasing managerial ownership stakes can improve firm performance at all levels of management ownership. OC. Yes. Some studies have shown a non-linear relationship between firm valuation and ownership-specifically that increasing ownership is good at first, but that in a certain range, managers can use their ownership level to partially block efforts to constrain them, even though they still own a minority of the shares. In this ?entrenching? range, increasing ownership could increase performance. D. No. Some studies have shown a non-linear relationship between firm valuation and ownership-specifically that increasing ownership is good at first, but that in a certain range, managers can use their ownership level to partially block efforts to constrain them, even though they still own a minority of the shares. In this ?entrenching? range, increasing ownership could reduce performance
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