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Executive compensation and competition in the banking and financial sectors

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  • Cuñat, Vicente
  • Guadalupe, Maria

Abstract

This paper studies the effect of product market competition on the compensation packages that firms offer to their executives. We use a panel of US executives in the 1990s and exploit two deregulation episodes in the banking and financial sectors as quasi-natural experiments. We provide difference-in-differences estimates of their effect on (1) total pay, (2) estimated fixed pay and performance-pay sensitivities, and (3) the sensitivity of stock option grants. Our results indicate that the deregulations substantially changed the level and structure of compensation: the variable components of pay increased along with performance-pay sensitivities and, at the same time, the fixed component of pay fell. The overall effect on total pay was small.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 33 (2009)
Issue (Month): 3 (March)
Pages: 495-504

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Handle: RePEc:eee:jbfina:v:33:y:2009:i:3:p:495-504

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Web page: http://www.elsevier.com/locate/jbf

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Keywords: Executive compensation Performance-related pay Incentives Product market competition Deregulation;

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References

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