Tuesday, March 27, 2018

Common Ownership, Competition, and Top Management Incentives

Miguel Antón (IESE Business School, Universidad de Navarra) ; Florian Ederer (Cowles Foundation, Yale University) ; Mireia Giné (IESE Business School, Universidad de Navarra) ; and Martin Schmalz (University of Michigan) discuss Common Ownership, Competition, and Top Management Incentives.

ABSTRACT: We show theoretically and empirically that managers have steeper financial incentives to expend effort and reduce costs when an industry’s firms tend to be controlled by shareholders with concentrated stakes in the firm, and relatively few holdings in competitors. A side effect of steep incentives is more aggressive competition. These findings inform a debate about the objective function of the firm.

https://lawprofessors.typepad.com/antitrustprof_blog/2018/03/common-ownership-competition-and-top-management-incentives.html

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