Product Market Competition and Executive Compensation: An Empirical Investigation
AbstractThere is an ongoing theoretical debate about whether firm-owners would optimally use stronger or weaker incentive schemes for their managers as productmarket competition increases. Schmidt (1997) shows that the outside options of the managers play a crucial role: if the market for managers is soft, an increase in competition is more likely to result in stronger incentive schemes than if the market for managers is tough. In this paper, we for the first time analyze the effects of product market competition on the level and structure of executive compensation. With panel-data for firms in the the U.S. manufacturing industries (NAICS 32-33), we investigate (a) how an increase in product market competition affects the use of incentive contracts and (b) whether this relationship depends on the outside options of the managers as predicted by theory.
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Bibliographic InfoPaper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp0309.
Date of creation: Jun 2003
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More information through EDIRC
CEO compensation; product market competition; incentive schemes;
Find related papers by JEL classification:
- G3 - Financial Economics - - Corporate Finance and Governance
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-07-29 (All new papers)
- NEP-CFN-2003-07-29 (Corporate Finance)
- NEP-ENT-2003-08-17 (Entrepreneurship)
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.:
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