Using Ownership as an Incentive: Does the “Too many Chiefs” Rule Apply in Entrepreneurial Firms?

Agency theory is used to develop hypotheses regarding the effects of ownership proliferation on firm performance. The authors examine the effects of chief executive officer (CEO) ownership, executive team ownership, and all employee ownership in addition to the moderating effect of risk on firm survival and stock price. Firms with low CEO ownership outperform those with high levels of CEO ownership across all levels of risk, but the effect is most pronounced for low-risk firms. Executive team ownership is negatively related to firm performance, whereas ownership for all employees is positively associated with firm performance, particularly for higher risk firms.