Spillovers Inside Conglomerates: Incentives and Capital

• 成果类型: Article
• 署名作者: Duchin, Ran; Goldberg, Amir; Sosyura, Denis
• 署名单位: University of Washington; University of Washington Seattle; Stanford University; University of Michigan System; University of Michigan
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhw095
• 发表日期: 2017
• 页码: 1696
• 关键词: corporate diversification; financing constraints; inefficient investment; empirical-analysis; SPECIAL DIVIDENDS; gift exchange; Peer groups; Firm value; dark side; cash flow

摘要

Using hand-collected data on divisional managers at conglomerates, we find that a change in industry pay in one division generates spillovers on managerial pay in other divisions of the same firm. These spillovers arise only within the boundaries of a conglomerate. The intra-firm spillovers increase when conglomerates have excess cash and when managers have more influence over its distribution, but decline in the presence of strong governance. These spillovers are associated with weaker performance and lower firm value. Our evidence is consistent with simultaneous cross-subsidization via managerial compensation and capital budgets and suggests that these practices arise in similar firms.