2017 GCGC
CONFERENCE: Tokyo

2-3 June 2017

Common Ownership, Competition and Top Management Incentives

Speaker:

Mireia Giné

Assistant Professor IESE Business School  

Discussant:

Bo Becker

Professor of Finance Stockholm School of Economics

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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