In this article, we examine the potential for management-worker alliances when employees have substantial voting rights from their equity...Read more
Manager-shareholder agency conflicts of interest manifest themselves in several forms. They include manager shirking and the consumption of...Read more
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 commonly owned by the same set of investors. Higher common ownership also leads to higher unconditional total pay. We exploit quasi-exogenous variation in common ownership 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.
