Product Market Competition and Executive Compensation: An Empirical Investigation

Funk, Patricia; Wanzenried, Gabrielle (June 2003). Product Market Competition and Executive Compensation: An Empirical Investigation (Diskussionsschriften 03-09). Bern: Universität Bern Volkswirtschaftliches Institut

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There is an ongoing theoretical debate about whether firm-owners would optimally use stronger or weaker incentive schemes for their managers as product market competition increases. Schmidt (1997) shows that the outside options of the managers play a crucial role: if the market for managers is soft, an increase in competition is more likely to result in stronger incentive schemes than if the market for managers is tough. In this paper, we for the first time analyze the effect of product market competition on the level and structure of executive compensation. With panel-data for firms in the the U.S. manufacturing industries (NAICS 32-33), we investigate (a) how an increase in product market competition affects the use of incentive contracts and (b) whether this relationship depends on the outside options of the managers as predicted by theory.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Diskussionsschriften

Publisher:

Universität Bern Volkswirtschaftliches Institut

Language:

English

Submitter:

Luca Adolf Brugger

Date Deposited:

11 Jun 2020 17:08

Last Modified:

11 Jun 2020 17:08

JEL Classification:

G3, J3, L2

BORIS DOI:

10.7892/boris.144077

URI:

https://boris.unibe.ch/id/eprint/144077

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