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Controlling shareholders and CEO pay monitoring: A panel threshold approach on the degree and seniority of control

Lionel Almeida

Finance, 2021, vol. 42, issue 1, 51-109

Abstract: The intensity of monitoring and its effects on the design of CEO pay can vary depending on the degree of ownership and the seniority of controlling shareholders. This study uses a panel threshold model to identify threshold effects in these two dimensions of control in French listed companies. The results show firms can be deemed to be non-controlled below a threshold of 10% of equity; above that, three regimes of controlled firms are identified: influential (10% to 33%), dominant (33% to 45%) and majority (above 45%) controls. One threshold point in the seniority of control ? at about eight years after taking control ? separates out new and long-term controls. Non- and newly-controlled firms are found to rely on optimal contracting to deal with agency and retention issues, while influential and majority controlling shareholders bring better governance and effective monitoring. Located at an intermediate level of control, dominant controlling shareholders show evidence of entrenchment.

Keywords: corporate control; CEO compensation; panel threshold regression (PTR) (search for similar items in EconPapers)
Date: 2021
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Working Paper: Controlling shareholders and CEO pay monitoring: A panel threshold approach on the degree and seniority of control (2021)
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