Skip to main content
Article thumbnail
Location of Repository

Executive compensation and product market competition

By Vicente Cuñat and Maria Guadalupe

Abstract

The aim of this paper is to study the effects of product market competition on the explicit compensation packages that firms offer to their executives. In order to measure the net effect of competition we use two different identification strategies. The first exploits cross sectoral variation in concentration ratios and the panel nature of the dataset. The second uses as a quasi-natural experiment the deregulations that occurred in the banking and financial sectors in the nineties and estimates differences in differences coefficients. Our results show that a higher level of product market competition increases the performance pay sensitivity of executive compensation schemes, and they hold through a number of performance measures such as stock options or bonus. The results are robust to a number of specification checks

Topics: HF Commerce, HD Industries. Land use. Labor
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 2004
OAI identifier: oai:eprints.lse.ac.uk:19985
Provided by: LSE Research Online

Suggested articles

Citations

  1. (1976). A “The Optimal Structure of Incentives and Authority within an Organization” doi
  2. (2001). and Abbie J.Smith Financial Accounting Information doi
  3. (1998). Are CEOs Really Paid Like Bureaucrats?” doi
  4. (2000). Are CEOs Rewarded for Luck? The Ones Without Principals Are, NBER working paper 7604, doi
  5. Competition , Risk and Managerial Incentives, American Economic Review, forthcoming doi
  6. (2002). Competition: the case of asymmetric …rms, mimeo
  7. (1984). Equilibrium Unemployment as a Worker Discipline Device. American Economic Review, doi
  8. (1999). Executive Compensation, Strategic Competition, and Relative Performance Evaluation: Theory and Evidence; doi
  9. (1999). Executive Compensation; .; Handbook of labor economics. Volume 3B, doi
  10. (1994). History O¤ers Some Clues on Signi¢cance of Interstate Branching"
  11. (1997). Managerial Incentives and Product Market Competition; Review of Economic Studies, doi
  12. (2002). Managerial Power and Rent Extraction in the Design of Executive Compensation, doi
  13. (1977). Monopolistic competition and optimum product diversity, doi
  14. (1979). Moral Hazard and Observability” The Bell doi
  15. (1974). Notes on Welfare Economics, Information and Uncertainty” doi
  16. (2000). Optimal Exercise Prices for Executive Stock Options American Economic Review, doi
  17. (1987). Paul Aggregation and Linearity in the Provision of Intertemporal Incentives; Econometrica, doi
  18. (1999). Samwick, Andrew A TheOtherSideoftheTrade-o¤: TheImpact of Risk on Executive Compensation;
  19. (1999). Sung Wook Strategic Managerial Incentive Compensation in Japan: Relative Performance Evaluation and Product Market Collusion, Review of Economics and Statistics, doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.