Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/20358 
Year of Publication: 
2004
Series/Report no.: 
IZA Discussion Papers No. 1123
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
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.
Subjects: 
executive compensation
product market competition
performance related pay
JEL: 
J31
M52
L1
Document Type: 
Working Paper

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