Executive compensation and competition in the banking and financial sectors |
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Authors: | Vicente Cuñat Maria Guadalupe |
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Institution: | 1. The London School of Economics (A450), Houghton Street, London WC2A 2AE, United Kingdom;2. Columbia University, CEPR and NBER, United States |
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Abstract: | This paper studies the effect of product market competition on the compensation packages that firms offer to their executives. We use a panel of US executives in the 1990s and exploit two deregulation episodes in the banking and financial sectors as quasi-natural experiments. We provide difference-in-differences estimates of their effect on (1) total pay, (2) estimated fixed pay and performance-pay sensitivities, and (3) the sensitivity of stock option grants. Our results indicate that the deregulations substantially changed the level and structure of compensation: the variable components of pay increased along with performance-pay sensitivities and, at the same time, the fixed component of pay fell. The overall effect on total pay was small. |
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Keywords: | M52 L1 J31 |
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