Executive compensation and competition in the banking and financial sectors

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 deregulation and increased product market competition on the compensation packages that firms offer to their executives. We use a panel of US executives in the nineties and exploit the 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) on 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, performance-pay sensitivities grew and, at the same time, the fixed component of pay fell. The overall effect on total pay was small.

Keywords: executive compensation; performance related pay; incentives; product market competition; deregulation (search for similar items in EconPapers)
JEL-codes: J31 L1 M52 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2007-10-01
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http://eprints.lse.ac.uk/24497/ Open access version. (application/pdf)

Related works:
Journal Article: Executive compensation and competition in the banking and financial sectors (2009)
Working Paper: Executive Compensation and Competition in the Banking and Financial Sectors (2007)
Working Paper: Executive Compensation and Competition in the Banking and Financial Sectors (2004)
Working Paper: Executive Compensation and Competition in the Banking and Financial Sectors (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:24497

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