Common Ownership, Competition, and Top Management Incentives

Common Ownership, Competition, and Top Management Incentives

Miguel Anton, Florian Ederer, Mireia Giné, Martin C. Schmalz

Series number :

Serial Number: 
511/2017

Date posted :

July 03 2017

Last revised :

February 06 2018
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Keywords

  • Common ownership • 
  • competition • 
  • CEO pay • 
  • management incentives • 
  • governance

We show theoretically and empirically that managers have steeper financial incentives to exert effort and reduce costs when an industry's firms are controlled by shareholders with concentrated stakes in the firm, and relatively few holdings in competitors. A side effect of steeper incentives is more aggressive competition.

These findings inform a debate about the objective function of the firm.

Authors

Real name:
Miguel Anton
Real name:
Martin C. Schmalz
Real name:
Florian Ederer
Prof.
Real name:
Mireia Giné
IESE Business School