Common Ownership, Executive Compensation, and Product Market Competition

The Accounting Review Pub Date : 2023-09-01 DOI:10.2308/tar-2021-0649

Matthew J. Bloomfield, Henry L. Friedman, Hwa Young Kim

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Abstract

ABSTRACT The negative effects of common ownership on competition have received significant attention, but many proposed mechanisms for institutional investor influence seem implausible. We develop and test an analytical model of optimal compensation in an oligopoly with common ownership, focusing on revenue-based pay as a plausible channel through which institutional investors might influence competition. Our model implies a negative effect of common ownership on firms’ use of revenue-based pay. Using both associative analyses and an event study difference-in-differences design based on plausibly exogenous institutional mergers, we find no evidence of a negative relation between common ownership and the use of revenue-based pay, except in an economically small subsample of extremely concentrated owners. Results involving relative performance incentives are similar. Collectively, our results provide no support for the notion that cross-owning blockholders in general influence compensation contracts in order to soften executives’ incentives to compete aggressively. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: D43; G30; L13; M12; M40; M52.

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共同所有权、高管薪酬与产品市场竞争

共同所有权对竞争的负面影响受到了极大的关注，但许多提议的机构投资者影响机制似乎难以置信。我们开发并测试了一个具有共同所有权的寡头垄断中最优薪酬的分析模型，重点关注基于收入的薪酬作为机构投资者可能影响竞争的合理渠道。我们的模型暗示公有制对公司使用基于收入的薪酬有负面影响。使用关联分析和基于似是而非的外生机构合并的事件研究差异设计，我们没有发现共同所有权与使用基于收入的薪酬之间存在负相关关系的证据，除了在经济上非常集中的所有者的小样本中。涉及相对绩效激励的结果相似。总的来说，我们的研究结果不支持这样的观点，即交叉持股的大股东通常会影响薪酬合同，以软化高管积极竞争的动机。数据可用性:数据可从文本中引用的公共来源获得。JEL分类:D43;G30;L13;M12;M40;M52。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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The Accounting Review

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