This study evaluates the impact of managerial ownership on the firm‟s performance and financial policies in the context of Pakistani market for sixty non-financial firms included in KSE 100 index for the period of 2000 to 2007. The analysis support that the concentration of managerial ownership affects the firms financial policies, mainly the leverage and dividend policies. The empirical analysis find out that leverage policy variable influenced managerial ownership negatively, supporting that the lower leverage level leads to high profitability firms engage in low managers‟ ownership program. The result also determines a negative and significant association among the mangers ownership concentration and dividend policy of the firms. This result is supported by the agency theory prediction suggesting that as a firm has high managerial ownership, the asymmetric information will decrease and directly decrease the effectiveness of the dividend policy. Beside this the firms with higher managerial ownership decrease their perquisites, so the conflict between manager‟s shareholders can be settled. It is also observed that the managers‟ ownership concentration in general has a positive relationship with the performance in the corporate culture of Pakistan, where major firms are the family oriented. When the managerial ownership is divided in three levels, low level (0 -5%), moderate level (5%-25% and high concentrated (above 25%), the performance positively affect only at low and moderate level. The ownership beyond 25% has a negative association with performance and support the entrenchment theory.
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