Morck, Shleifer, and Vishny (1988) examine the relationship between management ownership and corporate performance, using Tobin's Q as a measure of performance. They find that as board holdings increase, Tobin's Q first rises and then declines. For older firms, there is weak evidence that Q is lower when run by a founding family member compared to an unrelated officer. The study investigates two hypotheses: the "convergence of interests" hypothesis, which suggests that higher management ownership improves performance, and the "entrenchment" hypothesis, which predicts that performance declines when management stakes are high enough to entrench them. The authors find that firms with management ownership between 5% and 20% have the highest Q values, indicating that the convergence of interests hypothesis is key at lower ownership levels, while the entrenchment hypothesis applies at higher levels. They also find that the profit rate is positively related to board ownership, with firms having 5-20% board ownership showing higher profit rates than those with negligible or dominant ownership. The study highlights the importance of controlling for industry and other factors in analyzing the relationship between ownership and performance. The authors conclude that the relationship between management ownership and corporate performance is nonlinear, with performance improving at lower ownership levels and declining at higher levels. They also note that the findings may be influenced by factors such as wealth constraints and growth opportunities. The study provides empirical evidence supporting the convergence of interests hypothesis at lower ownership levels and the entrenchment hypothesis at higher levels.Morck, Shleifer, and Vishny (1988) examine the relationship between management ownership and corporate performance, using Tobin's Q as a measure of performance. They find that as board holdings increase, Tobin's Q first rises and then declines. For older firms, there is weak evidence that Q is lower when run by a founding family member compared to an unrelated officer. The study investigates two hypotheses: the "convergence of interests" hypothesis, which suggests that higher management ownership improves performance, and the "entrenchment" hypothesis, which predicts that performance declines when management stakes are high enough to entrench them. The authors find that firms with management ownership between 5% and 20% have the highest Q values, indicating that the convergence of interests hypothesis is key at lower ownership levels, while the entrenchment hypothesis applies at higher levels. They also find that the profit rate is positively related to board ownership, with firms having 5-20% board ownership showing higher profit rates than those with negligible or dominant ownership. The study highlights the importance of controlling for industry and other factors in analyzing the relationship between ownership and performance. The authors conclude that the relationship between management ownership and corporate performance is nonlinear, with performance improving at lower ownership levels and declining at higher levels. They also note that the findings may be influenced by factors such as wealth constraints and growth opportunities. The study provides empirical evidence supporting the convergence of interests hypothesis at lower ownership levels and the entrenchment hypothesis at higher levels.