Traveling Governance Through Common Ownership Peers : Evidence from Clawback Provision Adoption

We find that clawback provision adoption travels across common ownership peers (i.e., firms that share at least one common owner) above and beyond other peer effects, including industry, geographical location, and board interlock. However, the peer effect is absent when the common owner is not an activist. We establish a causal inference based on exogenous changes in the investor-investee relation caused by an asset manager merger. The peer effect is stronger when adoption’s benefits (costs) are higher (lower). Our finding about traveling governance has important implications in a market where the common ownership trend is growing