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How does product market competition shape incentive contracts?

Vicente Cuñat () and Maria Guadalupe ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: 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.

Keywords: Performance-related pay; Product market competition (search for similar items in EconPapers)
JEL-codes: J32 J33 J41 J49 M12 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2005-05
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http://eprints.lse.ac.uk/19894/ Open access version. (application/pdf)

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Journal Article: How Does Product Market Competition Shape Incentive Contracts? (2005) Downloads
Working Paper: How Does Product Market Competition Shape Incentive Contracts? (2005) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:19894

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