| Abstract: | This paper applies agency theory to explore the relationship between insider stock ownership and firm performance, particularly in terms of technical efficiency. Insiders are further classified into executives, outside directors, and large shareholders to conduct a detailed study. Six‐year (1996–2001) panel data of 416 Taiwanese listed electronics firms are examined by the stochastic production frontier approach. It is observed that raising the executive‐to‐insider holding ratio first causes a decrease and then an increase in technical efficiency, forming a U‐shaped relationship. However, the board‐to‐insider holding ratio is negatively associated with technical efficiency. The results indicate that equity ownership of top officers in high‐tech firms should be encouraged to enhance firm productivity. Copyright © 2005 John Wiley & Sons, Ltd. |
