Managerial incentives and strategic choices of firms with different ownership structures

Shantanu Banerjee, Swarnodeep Homroy

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    Abstract

    We examine how ownership structure affects managerial incentive alignment mechanisms and strategic objectives. We compare large Indian firms with dispersed equity ownership with business-group affiliates operating within the same institutional frameworks. We find that the performance sensitivity of CEO pay and turnover differ significantly across group affiliates and stand-alone firms. The strategic choices of firms also differ in response to managerial incentives. However, we find that, regardless of those differences, firm performance is similar for both types of firms. Overall, this paper suggests that ownership structure and managerial incentives can adjust to optimize strategic choices and firm performance. (C) 2017 Elsevier B.V. All rights reserved
    Original languageEnglish
    Pages (from-to)314-330
    JournalJournal of Corporate Finance
    Volume48
    DOIs
    Publication statusPublished - Feb-2018

    Keywords

    • INDIAN BUSINESS GROUPS
    • CORPORATE GOVERNANCE
    • EXECUTIVE TURNOVER
    • CEO COMPENSATION
    • FAMILY OWNERSHIP
    • EMERGING MARKETS
    • PERFORMANCE
    • SHAREHOLDERS
    • JAPAN
    • WORLD

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