Executive Compensation and Competition in the Banking and Financial Sectors

By V. Cuñat, Maria Guadalupe. Social Science Research Network, 2009

193 citations recorded by the source corpus.

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.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/53cc36e5ddf2c4cd1924a9026c1a7f9ca10867e6

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Citations in the corpus

What’s in an education? Implications of CEO education for bank performance (2016, background): “…a homogenous industry, namely the U.S. banking sector, and thereby control for important differences in CEO talent and labour market demand across different industries (Rajagopalan and Datta, 1996; Gabaix and Landier, 2008; Cuñat and Guadalupe, 2009; Frydman and Jenter, 2010; Falato et al., 2015).”
Generalists versus specialists: Lifetime work experience and chief executive officer pay (2013, background): “The increased importance of general skills could result from product market changes due to industry deregulation (Hubbard and Palia, 1995; and Cunat and Guadalupe, 2009a) or from foreign competition (Cunat and Guadalupe, 2009b).”
Bonus Culture: Competitive Pay, Screening, and Multitasking (2016, background): “Studying the compensation of US executives, Cuñat and Guadalupe ð2009bÞ show that import penetration of their industry ðinstrumented with exchange rates and tariffsÞ increases the sensitivity of pay to company performance while reducing the fixed component.”
Globalization and the Provision of Incentives inside the Firm: The Effect of Foreign Competition (2009, unknown): “[15] Cuñat, Vicente, and Guadalupe, Maria.”
CEO pay incentives and risk-taking: Evidence from bank acquisitions (2011, background): “Next to M&A, bank deregulation is associated with sharp increases in the share of equity-based CEO compensation in the banking industry (Hubbard and Palia, 1995; Chen et al., 2006, Cuñat and Guadalupe, 2009).”