How does product market competition shape incentive contracts?
By: Vicente Cuñat and Maria Guadalupe.
Contributors: Guadalupe, Maria.; London School of Economics and Political Science. Centre for Economic Performance.
Series: CEP discussion paper ;; no. 687; Discussion paper (London School of Economics and Political Science. Centre for Economic Performance : Online) ;; no. 687.
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Published: 2005
Place of publication: London
Language: eng
Format: Electronic resource
Description: This paper studies the effect of product market competition on the explicit compensation packages that firms offer to their CEOs, executives and workers. We use a large sample of both traded and non-traded UK firms and exploit a quasi-natural experiment associated to an increase in competition. The sudden appreciation of the pound in 1996 implied different changes in competition for sectors with different degrees of openness. Our difference in differences estimates show that a higher level of product market competition increases the performance pay sensitivity of compensation schemes, in particular for executives.
Notes: Includes bibliographical references.
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"May 2005."
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