Empirical studies have found that, across firms, Tobin's Q ratio initially increases with managerial ownership fraction, but beyond a critical level, the ratio decreases with further increases in managerial ownership.One argument for why this ratio decreases at higher managerial ownership levels is that:

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The decrease in Tobin's Q ratio at higher managerial ownership levels is often attributed to management entrenchment, where managers use their significant ownership stake to solidify their position and make decisions that benefit themselves at the expense of the firm's value, rather than aligning with shareholder interests.

Empirical Studies Have Found That, Across Firms, Tobin's Q Ratio