Seminar – Common Ownership, Competition & Top Management Incentives

Dr Martin Schmalz, Saïd Business School

When one firm’s strategy affects other firms’ value, optimal executive incentives depend on whether shareholders have interests in only one or in multiple firms. Performance sensitive contracts induce managerial effort to reduce costs, and lower costs induce higher output. Hence, greater managerial effort can lead to lower product prices and industry profits. Therefore, steep managerial incentives can be optimal for a single firm and at the same time violate the interests of common owners of several firms in the same industry. Empirically, managerial wealth is more sensitive to performance when a firm’s largest shareholders do not own large stakes in competitors.

Speaker bio

Martin Schmalz is an Associate Professor of Finance (with tenure) at the University of Oxford’s Saïd Business School, a Research Affiliate with the Centre for Economic Policy Research (London) and CESIfo (München), and a Research Member with the European Corporate Governance Institute (Brussels). He previously served as the NBD Bancorp Assistant Professor in Business Administration, Harry H. Jones Research Scholar, and as an Assistant Professor of Finance at the University of Michigan’s Stephen M. Ross School of Business and a Faculty Affiliate of the Centre on Finance, Law, and Policy at the University of Michigan

He was featured as one of the “40 under 40” best business school professors worldwide at the age of 33. He has taught PhD courses in corporate financial theory, the finance core for BBA and EMBA, and won a Teaching Excellence Award for his case based “Valuation” elective in Michigan’s daytime MBA curriculum. He now teaches an elective for Oxford’s MBAs, MFEs, and MLFs on Big Data and Machine Learning in Finance. He holds a graduate degree (Dipl.-Ing.) in mechanical engineering from the Universität Stuttgart (Germany) and an MA and PhD in Economics from Princeton University (USA).

Dr Schmalz has published papers on entrepreneurship, corporate finance and governance, behavioural finance and asset pricing, and various studies of the asset management industry. His research on how the ownership structure of firms affects firm behaviour and market outcomes has affected policy making and antitrust enforcement worldwide.

His research has been published in The Journal of Finance, Journal of Financial Economics, and Review of Financial Studies, and has won various awards, including a Brattle Group Distinguished Paper Prize for one of the best papers published in The Journal of Finance in 2017. It has been covered, among others, by The New York Times, The Economist, Wall Street Journal, Financial Times, Bloomberg, The New Yorker, The Atlantic, Forbes, Fortune, Frankfurter Allgemeine Zeitung. He was invited to present to regulators and policy makers across the globe, including the US Department of Justice, The White House Council of Economic Advisers, European Commission, European Parliament, OECD, various central banks, and at universities across America, Europe, Asia, and Australia.