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Managerial incentives and strategic choices of firms with different ownership structures

Research output: Contribution to journalJournal article

E-pub ahead of print
<mark>Journal publication date</mark>02/2018
<mark>Journal</mark>Journal of Corporate Finance
Volume48
Number of pages17
Pages (from-to)314-330
<mark>State</mark>E-pub ahead of print
Early online date10/10/17
<mark>Original language</mark>English

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.

Bibliographic note

This is the author’s version of a work that was accepted for publication in Journal of Corporate Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Corporate Finance, 48, 2017 DOI: 10.1016/j.jcorpfin.2017.10.001