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Product Market Competition and CEO Pay Benchmarking

In: HANDBOOK OF FINANCIAL ECONOMETRICS, MATHEMATICS, STATISTICS, AND MACHINE LEARNING

Author

Listed:
  • Ivan E. Brick
  • Darius Palia

Abstract

This chapter examines the impact of product market competition on the benchmarking of a CEO’s compensation to their counterparts in peer companies. Using a large sample of US firms, we find a significantly greater effect of CEO pay benchmarking in more competitive industries than in less competitive industries. Using three proxies for managerial talent that have been used by Albuquerque et al. (2013), we find that CEO benchmarking is more pronounced in competitive markets wherein managerial talent is more valuable. This suggests that pay benchmarking and product market competition are complements. The above results are not due to industry homogeneity.

Suggested Citation

  • Ivan E. Brick & Darius Palia, 2020. "Product Market Competition and CEO Pay Benchmarking," World Scientific Book Chapters, in: Cheng Few Lee & John C Lee (ed.), HANDBOOK OF FINANCIAL ECONOMETRICS, MATHEMATICS, STATISTICS, AND MACHINE LEARNING, chapter 45, pages 1695-1723, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811202391_0045
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    More about this item

    Keywords

    Financial Econometrics; Financial Mathematics; Financial Statistics; Financial Technology; Machine Learning; Covariance Regression; Cluster Effect; Option Bound; Dynamic Capital Budgeting; Big Data;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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