The Relationship Between Competition and the Fraction of Firms Using Stock-Based Compensation in an Industry

Hsing-Hua Huang () and Chia-Fan Lin
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Hsing-Hua Huang: Department of Information Management and Finance, National Chiao Tung University, No. 1001 University Road, Hsinchu City 300, Taiwan
Chia-Fan Lin: Banking Bureau, Financial Supervisory Commission, 7th Floor, No. 7, Sec. 2, Xianmin Blvd., Banqiao Dist., New Taipei City 220, Taiwan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2014, vol. 17, issue 01, 1-18

Abstract: This paper theoretically and empirically investigates the relationship between the intensity of product market competition and the fraction of firms that use stock-based compensation in an industry. By employing the relationship between a firm's risk-taking behavior and the use of stock-based compensation, we theoretically show that when the fraction of firms using stock-based compensation is less (more) than one-half, there is a positive (negative) relationship between the fraction and the intensity of product market competition and further provide some supportive empirical evidence. Our results imply that there is more heterogeneity in firms' stock-based compensation policies in the more competitive industry.

Keywords: Stock-based compensation; product market competition; industry equilibrium (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0219091514500064

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