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 :

July 03 2017
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Keywords

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

We show theoretically and empirically that executives are paid less for their own firm's performance and more for their rivals' performance if an industry's firms are more commonly owned by the same set of investors. Higher common ownership also leads to higher unconditional total pay.

We exploit quasi-exogenous variation in common ownership from a mutual fund trading scandal to support a causal interpretation. These findings challenge conventional assumptions in the corporate finance literature 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