Common ownership and executive pay duration
Abstract
Abstract The increasing prevalence of institutional cross‐holdings corresponds with the importance of common ownership in today's concentrated financial markets. This study investigates the influence of common ownership on executive pay duration. We find that common owners use long‐duration pay as a mechanism to mitigate managerial myopia, which is the tendency to prioritize short‐term gains over long‐term value. Using a host of identification strategies, including indexer/non‐indexer splits, blockholder fixed effects, and a quasi‐natural experiment involving financial institution mergers, we show that endogenous factors are not likely to drive our conclusions or inferences. The relation between common ownership and pay duration is stronger in firms with characteristics conducive to myopia, such as high liquidity, information asymmetry, and strong non‐compete agreement enforceability. Our results suggest that common owners use longer incentive horizons to align managerial actions with long‐term firm performance, reducing stock price crash risk and enhancing sustainable value creation.
Fields of Study & Subjects
Corporate Finance and Governance
Auditing
Earnings Management
Governance
Financial Markets and Investment Strategies
Publication details
- Journal / source
- The Journal of Financial Research
- Publication date
- 5 January 2026
- Language
- EN