Article

China Accounting and Finance Review

, 17:3

First online:

Open Access This content is freely available online to anyone, anywhere at any time.

Managerial Shareholding, Investment Flexibility, and Equity Valuation *

  • Qingchuan HouAffiliated withInstitute of Accounting and Finance, Shanghai University of Finance and Economics
  • , Qinglu JinAffiliated withInstitute of Accounting and Finance, Shanghai University of Finance and Economics Email author 
  • , Peipei ZhangAffiliated withSchool of Accountancy, Shanghai University of Finance and Economics
  • , Man ZhangAffiliated withInstitute of Accounting and Finance, Shanghai University of Finance and EconomicsSchool of Accountancy, Shanghai University of Finance and Economics

Abstract

Using a sample of firms listed on the Chinese stock markets from 2003 to 2012, this paper investigates the impact of managerial shareholding on corporate investment decisions and the equity valuation of the growth/adaptation options from the perspective of the real options-based valuation theory. In addition, it examines whether the relationship between managerial shareholding and corporate investment and equity valuation varies with the type of ownership. The empirical results indicate that managerial shareholding can enhance the flexibility of management investment, increasing the equity value attributable to the growth and adaptation options. Further analyses show that such effects are found primarily in private firms.

Keywords:

Managerial Shareholding Investment Flexibility Growth Option Adaptation Option