Essays on ownership structure and corporate governance
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Authors
Li, Xiuwen
Issue Date
2024-08
Type
Electronic thesis
Thesis
Thesis
Language
en_US
Keywords
Management
Alternative Title
Abstract
This dissertation consists of two distinct but related essays examining the impact of ownership structure on corporate governance.The first essay investigates the relationship between passive institutional ownership and the firm’s pay disparity. Public concern regarding the gap between top managers and rank-and-file workers is rapidly growing with the Pay Ratio Disclosure rule’s enaction. This essay uses the direct pay ratio information disclosed by the firm’s proxy statements and the 2SLS approach to examine whether ownership structure impacts a firm’s pay disparity. More specifically, I investigate whether and how passive institutional investors affect the within-firm pay gap. I find that passive ownership is positively associated with the firm’s pay disparity. I also find that passive investors are more likely to support management regarding say-on-pay voting. Moreover, I also find that the increasing effect is more pronounced for firms with more talented CEOs and fewer active investors, and is positively associated with firm performance. The findings suggest that passive investors value managers’ ability more than pay disparity and influence a firm’s compensation policy through “behind-the-scene” engagement.
In the second essay, I examine the impact of passive institutional investors on corporation managerial behavior. Specifically, I exploit the Russell Index reconstitution to examine how passive investors impact firms’ forward-looking statements. I find that firms with more passive ownership modify their forward-looking statements within the MD&A year over year less. The findings indicate that an exogenous increase in passive ownership results in management releasing less new information in their forward-looking statements within the MD&A. Further analysis shows that the declined informativeness of the firm’s forward-looking statements is associated with higher stock crash risk and less firm-specific information in the firm’s stock price. The findings indicate that passive investors have a negative impact on the informativeness of the firm’s forward-looking statements within the MD&A and may preempt the firm’s forward-looking information from other channels of corporate disclosure.
Description
August 2024
School of Management
School of Management
Full Citation
Publisher
Rensselaer Polytechnic Institute, Troy, NY