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Transient institutional ownership, firm performance, and CEO cash compensation and career concern
Juan Wang,
Singapore Management University
ABSTRACT. Research suggests that management cares about meeting consensus analyst expectations when transient institutional holdings are high. This study provides economic incentives in terms of CEO cash compensation and career concerns respectively that motivate managers to do so with high transient institutional holdings. After controlling for the general cash pay-for-performance relation, I find a significant incremental reduction in the CEO’s cash pay when the firm’s earnings fall short of analyst expectations with high transient institutional ownership. After controlling for the general turnover-for-performance relation, I find a significant incremental increase on the CEO’s turnover likelihood when the firm’s earnings fall short of analyst expectations with high transient institutional ownership. Overall, this study suggests that both CEO cash compensation and career concerns provide CEOs with economic incentives to meet analyst expectations when transient institutional holdings are high.
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