No Need for Help: The Effect of CEO Incentives on Blockholder Ownership

89 Pages Posted: 12 Aug 2022 Last revised: 28 Dec 2023

See all articles by Sheng Huang

Sheng Huang

Jinan University

Garry J. Twite

University of Melbourne - Department of Finance; University of Melbourne - Faculty of Business and Economics; Financial Research Network (FIRN)

Date Written: December 19, 2023

Abstract

Given the growing prominence of blockholders, this paper examines how CEO incentives affect blockholder ownership in a firm. We find that stronger CEO incentives deter blockholders from being present in a firm. We also find that the negative relation is driven by blockholders who are monitors. To support the causal claim, we examine the FASB and SEC regulation changes in 2006 that were likely to have increased blockholding via reducing CEO incentives. Overall, the results suggest that CEO incentive contracts substitute for blockholder monitoring in mitigating the shareholder-manager conflict.

Keywords: Blockholder, CEO Incentives, Corporate Governance

JEL Classification: G23, G32, G34

Suggested Citation

Huang, Sheng and Twite, Garry J. and Twite, Garry J., No Need for Help: The Effect of CEO Incentives on Blockholder Ownership (December 19, 2023). Proceedings of the EUROFIDAI-ESSEC Paris December Finance Meeting 2022, Available at SSRN: https://ssrn.com/abstract=4183739 or http://dx.doi.org/10.2139/ssrn.4183739

Sheng Huang (Contact Author)

Jinan University ( email )

Huang Pu Da Dao Xi 601, Tian He District
Guangzhou, Guangdong 510632
China

Garry J. Twite

University of Melbourne - Faculty of Business and Economics ( email )

Department of Finance
Melbourne, VIC 3010
Australia
+61 3 90356172 (Phone)

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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