Common Ownership, Incentives & Productivity

Common Ownership, Incentives & Productivity

 

Fiona Kasperk

University of Oxford - Said Business School

Amir Amel-Zadeh

University of Oxford - Said Business School

Martin C. Schmalz

CEPR; University of Oxford - Finance; CESifo; European Corporate Governance Institute (ECGI)

Abstract

We collect uniquely comprehensive ownership data for the universe of U.S. public firms to examine whether variation in ownership helps explain variation in productivity. We find that common ownership of product market rivals is negatively associated with total factor productivity. Using index additions of competitors as shocks to common ownership, we find evidence of an indirect causal effect on productivity: common ownership affects productivity through a reduction in performance-sensitive managerial compensation, which in turn causes lower productivity.