Conclusion
Our aim was to examine if there is any correlation between CEO total remuneration and
institutional shareholding concentration in large firms in Sweden. Our findings suggest
that large institutional holdings do influence the CEO total compensation. This indicates
the role of institutions as powerful monitors for companies. These actions are costbeneficial
for large holdings as selling and selecting new company has its negative sides.
We tested the effect of institutional ownership aggregation on CEO total pay. We found
that in this case the correlation between the two is positive, indicating that small
institutional holdings does not monitor and control CEO pay which leads to increases of
CEO compensation. On the other hand small holdings do not tie institutions to the
company as in the opposite case which allows them to “vote with feet” and sell the
company shares (Parrino, Sias, and Starks, 2003).
We checked robustness of our results by changing concentration indicator into Herfindahl
index, altering the definition of concentration from Top 5 to Top 3 and Top 7. An
alternative check for aggregation was done by varying Total-Top 5 into Total-Top 3 and
Total-Top 7. The results were still the same supporting our hypotheses.
Our study investigates also institutional investors’ concentration and aggregation effects
on CEO cash compensation. We found that institutional shareholding concentration
decreases CEO cash compensation, and aggregation leads to its increase. The possible
explanations for these findings are the same as that for the case of total compensation.