Skin in the Game: Should Investors Care About Manager and Board Member Ownership?

Sammanfattning: In this study, we investigate if companies where corporate insiders (board members and management teams) own a significant share of the company, have a better stock price performance than companies where corporate insiders own little or no shares. We use the Fama-French three-factor model to break down the stock price performance. The geographic scope of the study is limited to the Nordic region (Sweden, Finland, Norway, and Denmark). The results of the study show that insider-owned companies have a better stock price performance than their non-insider-owned counterparts. The monthly over-performance we find is 0.74% for insider-owned companies and 0.40% for a market-neutral portfolio consisting of long positions (buying) insider-owned companies and short positions (selling) in non-insider-owned companies. Therefore, investors should take the overperformance of insider-owned companies into account when making investment decisions.