Teaming up and quiet intervention: The impact of institutional investors on executive compensation policies

Mieszko Mazur, Galla Salganik-Shoshan

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

In this paper, we investigate whether institutional investors intervene in firms in order to impact their incentive systems. We use metrics based on geographic distance between institutional investors as proxies for the intensity of their strategic interactions and plausible interventions. We find that when investors are geographically proximate to one another, firms tend to adopt executive compensation contracts that exhibit more performance-based mechanisms, higher incentives to expend managerial effort, and higher incentives to make risky and positive NPV policy choices. We also find that geographic distance between institutions is a significant determinant of the executive pay differentials.

Original languageEnglish
Pages (from-to)65-83
Number of pages19
JournalJournal of Financial Markets
Volume35
DOIs
StatePublished - 1 Sep 2017

Keywords

  • Executive compensation
  • Executive pay disparity
  • Geography
  • Institutional investors
  • Strategic interactions

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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