Spillovers Inside Conglomerates: Incentives and Capital

Ran Duchin, Amir Goldberg, Denis Sosyura

Research output: Contribution to journalArticlepeer-review

16 Scopus citations


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 intrafirm 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.

Original languageEnglish (US)
Pages (from-to)1696-1743
Number of pages48
JournalReview of Financial Studies
Issue number5
StatePublished - May 1 2017
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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