Abstract
Owners of assets (principals) have always faced the problem of entrusting their assets with other people (agents) who use these assets in some way other than what the principal desire, a phenomenon commonly known as the 'agency problem'. Research into the agency problem has sought to determine what motivates agents, and what can be done to minimise the divergence between the agent's actions and the principal's best interests. One area of such research investigates the what happens to firm performance when the agent/principal distinction is lessened by the agent acquiring some ownership stake in the asset.
The predictions from theoretical research, and support from empirical research, into the relationship between inside ownership and performance varies significantly. The inconsistency between different empirical studies into the relationship between inside ownership and performance may be due to problems suffered by the corporate data used in these studies. This thesis investigates the inside ownership/performance relationship utilising non-corporate data, specifically horse racing data, in an attempt to avoid these problems.
In general, the results from this thesis suggest that a negative relationship exists between trainer ownership and performance. These results support labour market discipline theories which predict that a negative relationship could exist between trainer ownership and performance.