Product market competition and managerial pay

Research output: Contribution to journalArticleResearchpeer-review

Abstract

In this study I find that product substitutability has a negative relation with pay-earnings but no relation with pay-stock return sensitivity, whereas market size and ease of entry have no relation with pay-earnings but a positive relation with pay-stock return sensitivity. These findings collectively imply that firms in more competitive industries place less reliance on earnings-based and greater reliance on stock-based measures to determine managerial compensation than firms in less competitive industries. I also find that product substitutability has a positive relation whereas market size and ease of entry have negative relations with managerial pay levels, suggesting different dimensions of product market competition may have independent influences on managerial pay design. Finally, I find that industry regulation has a positive relation with pay-earnings but a negative relation with pay-stock return sensitivity. This study’s findings suggest a contextual approach to examining the relation between industry attributes and managerial pay.

Original languageEnglish
Pages (from-to)203-222
Number of pages20
JournalJournal of Management Accounting Research
Volume32
Issue number1
DOIs
Publication statusPublished - 2020

Keywords

  • Managerial compensation
  • Managerial incentives
  • Managerial performance evaluation
  • Product market competition

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