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Employing a new blockholder-firm panel data set in which we can track large shareholders across firms and over time, we find that firms' investment, financial, operational, and executive compensation policies vary with the particular blockholder present in a firm. The effects are strongest for activists, pension funds, and corporations, and weakest for banks, trusts, and money managers. We also find that large-shareholder fixed effects in corporate policies vary systematically with blockholder fixed effects in performance. Finally, we show that activists, pension funds, corporations, and private equity firms are more likely to influence firm policies, while mutual funds select firms based on their policies. The contribution of our paper is to show that heterogeneity in beliefs, skills, or risk preferences across large shareholders plays an important role for firms' policies and performance.JEL classification: G31; G32; G34; G35

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractAnalyzing a large panel that matches public firms with worker-level data, we find that managerial entrenchment affects workers' pay. CEOs with more control pay their workers more, but financial incentives through ownership of more cash flow rights mitigate such behavior. These findings do not seem to be driven by productivity differences, and are unaffected by a series of robustness tests. Further evidence suggests that higher pay comes with non-pecuniary private benefits for a CEO, such as lower-effort wage bargaining with aggressive workers and their unions. Moreover, we find that entrenched CEOs pay more to employees who are closer to them in the firm's hierarchy, such as CFOs, vice-presidents and other executives, and whitecollar workers who work at or geographically close to the corporate headquarters. The evidence is consistent with an agency model in which managers have a taste for both profits and highly paid employees, and implies that corporate governance can be of importance for labor market outcomes such as workers' pay.

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