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Executive compensation and competitive pressure in the product market: How does firm entry shape managerial incentives?

Dam, Kaniṣka and Robinson-Cortés, Alejandro (2020) Executive compensation and competitive pressure in the product market: How does firm entry shape managerial incentives? Mathematical Social Sciences, 106 . pp. 60-77. ISSN 0165-4896. https://resolver.caltech.edu/CaltechAUTHORS:20200331-102146290

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Abstract

Motivated by empirical evidence, we develop an incentive contracting model under oligopolistic competition to study how incumbent firms adjust managerial incentives following deregulation policies that enhance competition. We show that firms elicit higher managerial effort by offering stronger incentives as an optimal response to entry, as long as incumbent firms act as production leaders. Our model draws a link between an industry-specific feature, the time needed to build production capacity, and the effect that product market competition has on executive compensation. We offer novel testable implications regarding how this industry-specific feature shapes the incentive structure of executive pay.


Item Type:Article
Related URLs:
URLURL TypeDescription
https://doi.org/10.1016/j.mathsocsci.2020.03.001DOIArticle
ORCID:
AuthorORCID
Dam, Kaniṣka0000-0001-7418-623X
Robinson-Cortés, Alejandro0000-0001-8340-1640
Additional Information:© 2020 Elsevier B.V. Received 26 July 2019, Revised 6 March 2020, Accepted 6 March 2020, Available online 31 March 2020. We are grateful to Luis Corchón (the editor) and the anonymous referees for insightful comments that helped improve the paper. We thank Archishman Chakraborty, Enrique Garza, Sonia Di Giannatale, Sergio Montero, Luciana Moscoso, Arijit Mukherjee, Kostas Serfes, Matt Shum and Leeat Yariv for helpful suggestions.
Subject Keywords:Oligopolistic competition; Firm entry; Managerial incentives
Classification Code:JEL: D43; D86; J33
Record Number:CaltechAUTHORS:20200331-102146290
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20200331-102146290
Official Citation:Kaniṣka Dam, Alejandro Robinson-Cortés, Executive compensation and competitive pressure in the product market: How does firm entry shape managerial incentives?, Mathematical Social Sciences, Volume 106, 2020, Pages 60-77, ISSN 0165-4896, https://doi.org/10.1016/j.mathsocsci.2020.03.001. (http://www.sciencedirect.com/science/article/pii/S0165489620300275)
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:102196
Collection:CaltechAUTHORS
Deposited By: Tony Diaz
Deposited On:31 Mar 2020 17:35
Last Modified:27 Aug 2020 22:54

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