Abstract

Paper Authors:  Miguel Antón, Florian Ederer, Mireia Giné and Martin Schmalz

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 com monly owned by the same set of investors. Higher common ownership also leads to higher unconditional total pay. We exploit quasi-exogenous variation in common owner ship 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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