Common Ownership, Competition, and Top Management Incentives

Common Ownership, Competition, and Top Management Incentives

Miguel Anton, Florian Ederer, Mireia Giné, Martin Schmalz

Series number :

Serial Number: 
511/2017

Date posted :

July 03 2017

Last revised :

December 08 2020
SSRN Share

Keywords

  • Common ownership • 
  • competition • 
  • Managerial incentives • 
  • Corporate governance • 
  • Antitrust

This paper presents a mechanism based on managerial compensation through which common ownership can affect product market outcomes. We embed a canonical managerial incentive design problem in a model of strategic product market competition under common ownership.

Consistent with empirical evidence, firm-level variation in common ownership causes variation in managerial incentives across firms, as well as variation in product prices, market shares, concentration, and output across markets—all without communication between shareholders and firms, coordination between firms, knowledge of shareholders’ incentives, or market-specific interventions by top managers. We provide empirical evidence consistent with the theoretical prediction that top management incentives are less performance-sensitive in firms whose large investors hold greater ownership stakes in industry competitors.

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Authors

Mr
Real name:
Miguel Anton
iese
Real name:
Florian Ederer