Executive compensation and product market competition

Cuñat, Vicente and Guadalupe, Maria (2004) Executive compensation and product market competition. CEPDP, 617. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 0753017199

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Abstract

The aim of this paper is to study the effects of product market competition on the explicit compensation packages that firms offer to their executives. In order to measure the net effect of competition we use two different identification strategies. The first exploits cross sectoral variation in concentration ratios and the panel nature of the dataset. The second uses as a quasi-natural experiment the deregulations that occurred in the banking and financial sectors in the nineties and estimates differences in differences coefficients. Our results show that a higher level of product market competition increases the performance pay sensitivity of executive compensation schemes, and they hold through a number of performance measures such as stock options or bonus. The results are robust to a number of specification checks.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk
Additional Information:	© 2004 the authors
Uncontrolled Keywords:	Executive compensation; product market competition; performance related pay
Library of Congress subject classification:	H Social Sciences > HF Commerce H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System:	M - Business Administration and Business Economics; Marketing; Accounting > M5 - Personnel Economics > M52 - Compensation and Compensation Methods and Their Effects (stock options, fringe benefits, incentives, family support programs, seniority issues) J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc. L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance
Sets:	Departments > Accounting and Finance Collections > Economists Online Research centres and groups > Centre for Economic Performance (CEP)
Rights:	http://www.lse.ac.uk/library/rights/LSERO.htm
Identification Number:	617
URL:	http://eprints.lse.ac.uk/19985/

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