Who’s Paying Attention? Measuring Common Ownership and Its Impact on Managerial Incentives

By Erik Gilje, Todd A. Gormley, Doron Levit. Journal of Financial Economics, 2019

138 citations recorded by the source corpus.

Abstract We derive a measure that captures the extent to which common ownership shifts 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 common ownership, including mergers in the asset management industry and, under certain circumstances, even indexing, could diminish managerial motives to internalize externalities. Our findings illustrate the importance of accounting for investor inattention when analyzing whether the growth of common ownership affects managerial incentives.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/2ccdb397eaa25dfb4380ee47972dca280bfa09e6

Citations in the corpus

• Common Ownership in America: 1980–2017 (2019, unknown): “37 One justification for this re-weighting might be that investors with large portfolios may become inattentive (Van Nieuwerburgh and Veldkamp (2010), Gilje et al. (2018a)).”
• Common Ownership, Competition, and Top Management Incentives (2016, unknown): “27An omission from this list of firm-level measures of common ownership is the measure proposed by Gilje et al. (2020). This is because in their model “the measure cannot be interpreted as a profit weight” (Backus et al., 2020) and, by assumption, it “does not allow for strategic interactions” betwe”