What determines the allocation of managerial ownership within firms? Evidence from investment management firms

- We examine allocation of ownership to individuals within investment management firms.
- Allocation depends upon the distribution of decision control and management rights.
- Higher ownership for managers with both executive and operational responsibilities
- Higher ownership for managers when benefits of cooperation are higher
- Increases in a manager's ownership correlate with increases in unsystematic risk.

We show that the allocation of managerial ownership to individuals within firms varies depending upon the joint distribution of decision control and decision management rights. Using a unique dataset of institutional investment management firms, we show that ownership is higher for managers: with both executive and operational responsibilities; when benefits of cooperation are higher; and with large contributions to firm value. Consistent with career concerns, we find increases in a manager's ownership are associated with increases in unsystematic risk. Ownership dispersion within the firm is associated with the allocation of monitoring and operational roles and the potential benefits of cooperation.