Institutional Investors and Executive Compensation (.pdf)
article by Hartzell and Starks finds that as institutional ownership goes up, the firm is more likely to use pay for performance plans. Additionally, the level of CEO pay tends to go down. These findings suggest that institutional investors make better monitors than ordinary investors do. Possibly more convincing however, (since it solves the endogenity problem which is that is the institutional … [ Read more ]
Content: Article | Authors: Jay C. Hartzell, Laura T. Starks | Subjects: Corporate Governance, Finance
Getting the Compensation Structure Right in the Mutual Fund Industry
Authors take a look at how money managers get compensated and whether these compensation schemes provide managers with the incentive to act in the investors’ best interests. Their research concludes that certain money managers, due to the generally accepted method of compensation in the mutual fund industry, are likely to increase their portfolio’s risk level in an effort to improve their chances of receiving … [ Read more ]
Content: Article | Authors: Keith C. Brown, Laura T. Starks | Source: strategy+business | Subjects: Finance, Industry Specific | Industry: Investment Banking