Executive Compensation and Competition in the Banking and Financial Sectors
London School of Economics & Political Science (LSE) - Financial Markets Group
INSEAD - Economics and Political Sciences; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 1123
This paper studies the effect of product market competition on the compensation packages that firms offer to their executives and in particular its impact on the sensitivity of pay to performance. To measure the effect of competition we use two different identification strategies on a panel of US executives. We exploit two deregulation episodes in the banking and financial sectors as quasi-natural experiments. We provide difference in differences estimates of the effect of competition on estimated performance-pay sensitivities and on the sensitivity of stock option grants. Our results indicate that a higher level of product market competition increases the performance pay sensitivity of executive compensation schemes.
Number of Pages in PDF File: 36
Keywords: Executive compensation, product market competition, performance related pay
JEL Classification: M52, L1, J31working papers series
Date posted: May 11, 2004
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.360 seconds