Managerial incentives and strategic choices of firms with different ownership structures

Shantanu Banerjee; Swarnodeep Homroy

doi:10.1016/j.jcorpfin.2017.10.001

Managerial incentives and strategic choices of firms with different ownership structures

Shantanu Banerjee^*, Swarnodeep Homroy

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

21 Citations (Scopus)

108 Downloads (Pure)

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 language	English
Pages (from-to)	314-330
Number of pages	17
Journal	Journal of Corporate Finance
Volume	48
DOIs	https://doi.org/10.1016/j.jcorpfin.2017.10.001
Publication status	Published - Feb-2018

Keywords

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

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10.1016/j.jcorpfin.2017.10.001

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Cite this

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title = "Managerial incentives and strategic choices of firms with different ownership structures",

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",

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author = "Shantanu Banerjee and Swarnodeep Homroy",

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doi = "10.1016/j.jcorpfin.2017.10.001",

language = "English",

volume = "48",

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AU - Homroy, Swarnodeep

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AB - 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

KW - INDIAN BUSINESS GROUPS

KW - CORPORATE GOVERNANCE

KW - EXECUTIVE TURNOVER

KW - CEO COMPENSATION

KW - FAMILY OWNERSHIP

KW - EMERGING MARKETS

KW - PERFORMANCE

KW - SHAREHOLDERS

KW - JAPAN

KW - WORLD

U2 - 10.1016/j.jcorpfin.2017.10.001

DO - 10.1016/j.jcorpfin.2017.10.001

M3 - Article

SN - 0929-1199

VL - 48

SP - 314

EP - 330

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

ER -