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Executive compensation and competition in the banking and financial sectors

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  • Vicente Cuñat
  • Maria Guadalupe

Abstract

This paper studies the effect of deregulation and increased product market competition on the compensation packages that firms offer to their executives. We use a panel of US executives in the nineties and exploit the 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) on 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, performance-pay sensitivities grew and, at the same time, the fixed component of pay fell. The overall effect on total pay was small.

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File URL: http://eprints.lse.ac.uk/24497/
File Function: Open access version.
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 24497.

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Length: 34 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:ehl:lserod:24497

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Web page: http://www.lse.ac.uk/
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Related research

Keywords: Executive compensation; Performance related pay; Incentives; product market competition; Deregulation.;

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