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Common Ownership, Competition, and Top Management Incentives

Author Info

Listed author(s):
  • Miguel Antón
  • Florian Ederer
  • Mireia Giné
  • Martin C. Schmalz

Abstract

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.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2016/wp-cesifo-2016-11/cesifo1_wp6178.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 6178.

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Date of creation: 2016
Handle: RePEc:ces:ceswps:_6178
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Keywords: common ownership; competition; incentives; executive pay;

Other versions of this item:

Find related papers by JEL classification:
  • G30 - Financial Economics - - Corporate Finance and Governance - - - General
  • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
  • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
  • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
  • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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Cited by:

  1. Russell Pittman, 2016. "The Strange Career of Independent Voting Trusts in U.S. Rail Mergers," EAG Discussions Papers 201603, Department of Justice, Antitrust Division.
  2. Gary Bolton & Axel Ockenfels & Peter Werner, 2016. "Leveraging social relationships and transparency in the insider game," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 2(2), pages 127-143, November.
  3. Jaspersen, Stefan, 2016. "Market power in the portfolio: Product market competition and mutual fund performance," CFR Working Papers 16-07, University of Cologne, Centre for Financial Research (CFR).

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