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Does firm heterogeneity lead to differences in relative executive compensation?

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  • Albuquerque, Ana

Abstract

Cost heterogeneity is an important source of performance disparity among firms. This heterogeneity conditions the strategic decisions that firms make in the product market and can lead to heterogeneity in the design of managerial compensation contracts. I investigate the effect of cost heterogeneity in a strategic product market environment where firms compete à la Cournot. The paper offers new predictions on how executive compensation contracts that account for relative performance must be adjusted for cost differences.

Suggested Citation

  • Albuquerque, Ana, 2010. "Does firm heterogeneity lead to differences in relative executive compensation?," Finance Research Letters, Elsevier, vol. 7(2), pages 80-85, June.
    • Handle: RePEc:eee:finlet:v:7:y:2010:i:2:p:80-85
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    References listed on IDEAS

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    1. Albuquerque, Ana, 2009. "Peer firms in relative performance evaluation," Journal of Accounting and Economics, Elsevier, vol. 48(1), pages 69-89, October.
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    8. Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563, Elsevier.
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    Cited by:

    1. Sang Hyuck Kim & Woo Gon Kim, 2011. "Re-Examining the Determinants of Executive Compensation in the Restaurant Industry: A Quantile Regression Approach," Tourism Economics, , vol. 17(5), pages 1035-1054, October.

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