This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Executive Compensation and Competition in the Banking and Financial Sectors

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Vicente Cuñat ()
Maria Guadalupe

Additional information is available for the following registered author(s):

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.JEL codes: M52, L1, J31Keywords: Executive compensation; performance related pay; incentives; product market competition; deregulation.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://fmg.lse.ac.uk/pdfs/dp598.pdf
File Format: application/pdf
File Function:
Download Restriction: Financial Markets Group Working Papers are free to download for academics and students, and for our subscribers and sponsors. If you fall into one of these categories but have trouble downloading our papers, or if you do not fall into one of these categories but would like to pay for a copy, please contact us at fmg@lse.ac.uk

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by Financial Markets Group in its series FMG Discussion Papers with number dp598.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:fmg:fmgdps:dp598

Contact details of provider:
Web page: http://fmg.lse.ac.uk/

For technical questions regarding this item, or to correct its listing, contact: (The FMG Administration).

Related research
Keywords:

Other versions of this item:

This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Benjamin E. Hermalin., 1991. "The Effects of Competition on Executive Behavior," Economics Working Papers 91-182, University of California at Berkeley.
    Other versions:
  2. Brian J. Hall & Jeffrey B. Liebman, 1998. "Are CEOs Really Paid Like Bureaucrats?," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 653-691, August. [Downloadable!] (restricted)
    Other versions:
  3. Yermack, David, 1995. "Do corporations award CEO stock options effectively?," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 237-269. [Downloadable!] (restricted)
  4. David Scharfstein, 1988. "Product-Market Competition and Managerial Slack," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 147-155, Spring. [Downloadable!] (restricted)
  5. Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, vol. 93(4), pages 1425-1436, September. [Downloadable!] (restricted)
  6. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June. [Downloadable!] (restricted)
  7. Stiroh, Kevin J & Strahan, Philip E, 2003. " Competitive Dynamics of Deregulation: Evidence from U.S. Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 801-28, October.
  8. Marianne Bertrand & Sendhil Mullainathan, 2001. "Are Ceos Rewarded For Luck? The Ones Without Principals Are," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 901-932, August. [Downloadable!] (restricted)
  9. Bebchuk, Lucian Arye & Fried, Jesse & Walker, David I, 2002. "Managerial Power and Rent Extraction in the Design of Executive Compensation," CEPR Discussion Papers 3558, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  10. Paul L. Joskow & Nancy L. Rose & Catherine Wolfram, 1996. "Political Constraints on Executive Compensation: Evidence from the Electric Utility Industry," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 165-182, Spring. [Downloadable!] (restricted)
    Other versions:
  11. Sherwin Rosen, 1990. "Contracts and the Market for Executives," NBER Working Papers 3542, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Oliver D. Hart, 1983. "The Market Mechanism as an Incentive Scheme," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 366-382, Autumn. [Downloadable!] (restricted)
  13. Jayaratne, Jith & Strahan, Philip E, 1996. "The Finance-Growth Nexus: Evidence from Bank Branch Deregulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 639-70, August. [Downloadable!] (restricted)
  14. Paul Joskow & Nancy Rose & Andrea Shepard, 1993. "Regulatory Constraints on CEO Compensation," NBER Reprints 1825, National Bureau of Economic Research, Inc.
  15. Bengt Holmstrom & Paul R. Milgrom, 1985. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Cowles Foundation Discussion Papers 742, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  16. Schmidt, Klaus M, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Blackwell Publishing, vol. 64(2), pages 191-213, April. [Downloadable!] (restricted)
    Other versions:
  17. James A. Mirrlees, 1976. "The Optimal Structure of Incentives and Authority Within an Organization," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 105-131, Spring. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Cuñat, Vicente & Guadalupe, Maria, 2006. "Globalization and the Provision of Incentives Inside the Firm," CEPR Discussion Papers 5950, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Stefan Beiner & Markus Schmid & Gabrielle Wanzenried, 2004. "Product Market Competition, Managerial Inventives, and Firm Valuation," Diskussionsschriften dp0412, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
  3. Vicente Cuñat & Maria Guadalupe, 2006. "Globalization and the Provision of Incentives Inside the Firm: The Effect of Foreign Competition," IZA Discussion Papers 2408, Institute for the Study of Labor (IZA). [Downloadable!]
Statistics
Access and download statistics

Did you know? IDEAS also indexes software components.

This page was last updated on 2008-7-23.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.