Should shareholders demand their board of directors to buy financial stake in the company to maximize wealth?

Abstract

This study empirically investigates if shareholders in Swedish Large Cap listed firms should demand from their board of directors to buy financia stake in the company. Arising demands from shareholders in especially American Fortune 500 companies brings the question to Swedish shareholders as well, yet no demands of such ownership exists. After conducting extensive data for 2001-2011 regarding board ownership and numerous performance measurements three types of regression analysis were made; linear, polynomial and multivariable regression analysis in order to determine how the companies have performed both financiall and operationally and how board ownership mpact each variable as well as the correlation between variables. The results show that there is a way to maximize wealth for the shareholders, reaching it requires the shareholders to demand personal stake from the board of directors in order to achieve optimal corporate governance or optimal incentives to perform its best. Perhaps the Swedish shareholders will follow the American trend moving on. Furthermore, this study contributes to previous research providing knowledge about how much or at what ratio the board of directors will perform their outmost for each variable.