Executive Compensation and Product Market Competition
AbstractThe aim of this paper is to study the effects of product market competition on the explicit compensationpackages that firms offer to their executives. In order to measure the net effect of competition we use twodifferent identification strategies. The first exploits cross sectoral variation in concentration ratios and thepanel nature of the dataset. The second uses as a quasi-natural experiment the deregulations that occurredin the banking and financial sectors in the nineties and estimates differences in differences coefficients. Ourresults show that a higher level of product market competition increases the performance pay sensitivity ofexecutive compensation schemes, and they hold through a number of performance measures such as stockoptions or bonus. The results are robust to a number of specification checks.
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Bibliographic InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0617.
Date of creation: Feb 2004
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Executive compensation; product market competition; performance related pay;
Other versions of this item:
- Vicente Cuñat & Maria Guadalupe, 2004. "Executive compensation and product market competition," LSE Research Online Documents on Economics 19985, London School of Economics and Political Science, LSE Library.
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-02 (All new papers)
- NEP-BEC-2005-01-02 (Business Economics)
- NEP-COM-2005-01-02 (Industrial Competition)
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