78 Pages Posted: 3 Jul 2016 Last revised: 9 Aug 2017
Date Written: June 1, 2017
We show that managers have stronger financial incentives to compete against rivals when an industry’s firms tend to be controlled by shareholders with concentrated stakes in the firm, and relatively few holdings in competitors. Conversely, wealth-performance sensitivities are reduced when there is more common ownership. We exploit quasi-exogenous variation in common ownership from a mutual fund trading scandal to support a causal interpretation. 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 (June 1, 2017). 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
By Kevin Murphy