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

Abstract

We also thank Alon Brav and Carola Schenone for sharing data on activists and airlines, respectively. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Common Ownership and Corporate Social Responsibility

“…The positive association between common ownership and a firm's CSR score is robust. We then show that our results are robust to alternative measures of common ownership including the newly developed measure in Gilje, Gormley and Levit (2019). Finally, our result is also robust to controlling for additional firm-level characteristics or the industry×year fixed effects.…”

“…We end the sample at 2012 because there are known issues with the data since 2013. In each year, we use the last quarter data for each firm to construct the measure (Gilje et al, 2019 In this paper, we follow Backus et al (2019) and use the average weight that a firm puts on its industry rivals' profits as the main measure of common ownership. The main advantage of this measure is that it is directly linked to the common ownership theory and empirically measures the parameter λ in equation 1of our model.…”

“…In columns (3) and (4), we assume that a firm's manager only maximizes the profits accrued to shareholders that hold at least 5% of the firm's outstanding shares and the top-5 shareholders, respectively. In column (5), we use the newly developed common ownership measure in Gilje et al (2019). In column (6), we control for additional firm-level characteristics.…”

“…The mostly commonly used one is modified HHI delta (MHHID) developed in O'Brien and Salop (2000). Recently, Backus et al (2019) revisit the common ownershiptheory and propose to use the weight that a firm puts on the profit of another firm (not necessarily the industry rival) as the measure for common ownership Gilje et al (2019). construct a model that incorporates investors' attention for the stocks in their portfolios and develop a new measure.…”

Common Ownership in America: 1980-2017

“…An alternative measure which more explicitly addresses investor inattention is proposed by Gilje et al (2018b). Inattention is related to the portfolio share of firm f rather than the normalized cash flow.…”