Annual Review of Financial Economics, Vol. 1, December 2018
29 Pages Posted: 3 Jul 2016 Last revised: 20 Oct 2017
Date Written: October 19, 2017
We show theoretically and empirically that managers have steeper financial incentives to expend effort and reduce costs when an industry's firms tend to be controlled by shareholders with concentrated stakes in the firm, and relatively few holdings in competitors. A side effect of steep incentives is more aggressive competition. These findings inform a debate about the objective function of the firm.
Keywords: Common ownership, competition, CEO pay, management incentives, governance
JEL Classification: D21, G30, G32, J31, J41
Suggested Citation: Suggested Citation
Anton, Miguel and Ederer, Florian and Gine, Mireia and Schmalz, Martin C., Common Ownership, Competition, and Top Management Incentives (October 19, 2017). Annual Review of Financial Economics, Vol. 1, December 2018; Ross School of Business Paper No. 1328; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 511/2017. Available at SSRN: https://ssrn.com/abstract=2802332 or http://dx.doi.org/10.2139/ssrn.2802332