Who's Paying Attention? Measuring Common Ownership and its Impact on Managerial Incentives
60 Pages Posted: 12 Mar 2019 Last revised: 28 Jul 2021
Date Written: March 2019
We derive a measure that captures the extent to which overlapping ownership structures shift managers’ incentives to internalize externalities. A key feature of the measure is that it allows for the possibility that not all investors are attentive to whether a manager’s actions benefit the investor’s overall portfolio. Empirically, we show that potential drivers of ownership overlap, including mergers in the asset management industry and the growth of indexing, could in fact diminish managerial motives. Our findings illustrate the importance of accounting for investor inattention and cast doubt on the possibility that the growth of common ownership has had a significant impact on managerial incentives.
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