DP12674 Common Ownership, Competition, and Top Management Incentives
|Author(s):||Miguel Antón, Florian Ederer, Mireia Gine, Martin Schmalz|
|Publication Date:||February 2018|
|Keyword(s):||CEO pay, Common ownership, Competition, corporate governance, management incentives|
|JEL(s):||D21, G30, G32, J31, J41|
|Programme Areas:||Labour Economics, Financial Economics, Industrial Organization|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12674|
We show theoretically and empirically that managers have steeper financial incentives to exert effort and reduce costs when an industry's firms are controlled by shareholders with concentrated stakes in the firm, and relatively few holdings in competitors. A side effect of steeper incentives is more aggressive competition. These findings inform a debate about the objective function of the firm.