Industry product market competition and managerial incentives |
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| Institution: | 1. Kent State University, Department of Accounting, College of Business Administration, P.O. Box 5190, Kent, OH 44242-0001, United States;2. Wake Forest University, Schools of Business, P.O. Box 7659, Winston-Salem, NC 27109, United States;1. Department of Economics, Indiana University, Bloomington, IN 47405, United States;2. Korea Insurance Research Institute, 35-4 Yoido-dong Youngdeungpo-gu, Seoul 150-600, Republic of Korea |
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| Abstract: | While some studies suggest that industry product market competition can substitute for managerial incentives, other studies suggest a complementary relation. The underlying assumption behind these studies is that competition can be uni-dimensionally proxied for by industry concentration. However, recent studies suggest that competition can reflect several dimensions: product substitutability, market size, and entry costs, given the level of industry concentration. Using these determinants of competition, this study contributes to the literature by showing that (a) firms provide stronger incentives when industry competition is greater, (b) competition is multi-dimensional in its relation to incentives; and (c) industry characteristics play a major role in influencing incentives. |
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