Who's Paying Attention? Measuring Common Ownership and its Impact on Managerial Incentives

60 Pages Posted: 12 Mar 2019 Last revised: 10 Apr 2019

See all articles by Erik Gilje

Erik Gilje

University of Pennsylvania - The Wharton School

Todd A. Gormley

Washington University in St. Louis

Doron Levit

University of Pennsylvania - Finance Department; European Corporate Governance Institute (ECGI)

Date Written: March 2019

Abstract

We derive a measure that captures the extent to which overlapping ownership structures shift managers’ incentives to internalize externalities. A key feature of the measure is that it allows for the possibility that not all investors are attentive to whether a manager’s actions benefit the investor’s overall portfolio. Empirically, we show that potential drivers of ownership overlap, including mergers in the asset management industry and the growth of indexing, could in fact diminish managerial motives. Our findings illustrate the importance of accounting for investor inattention and cast doubt on the possibility that the growth of common ownership has had a significant impact on managerial incentives.

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Suggested Citation

Gilje, Erik and Gormley, Todd A. and Levit, Doron, Who's Paying Attention? Measuring Common Ownership and its Impact on Managerial Incentives (March 2019). NBER Working Paper No. w25644. Available at SSRN: https://ssrn.com/abstract=3350413

Erik Gilje (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Todd A. Gormley

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
(314) 935-7171 (Phone)

HOME PAGE: http://www.gormley.info

Doron Levit

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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