The relationship between competition and the fraction of firms using stock-based compensation in an industry

Hsing-Hua Huang*, Chia Fan Lin

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

This paper theoretically and empirically investigates the relationship between the intensity of product market competition and the fraction of firms that use stock-based compensation in an industry. By employing the relationship between a firm's risk-taking behavior and the use of stock-based compensation, we theoretically show that when the fraction of firms using stock-based compensation is less (more) than one-half, there is a positive (negative) relationship between the fraction and the intensity of product market competition and further provide some supportive empirical evidence. Our results imply that there is more heterogeneity in firms' stock-based compensation policies in the more competitive industry.

Original languageEnglish
Article number1450006
JournalReview of Pacific Basin Financial Markets and Policies
Volume17
Issue number1
DOIs
StatePublished - 1 Jan 2014

Keywords

  • Industry equilibrium
  • Product market competition
  • Stock-based compensation

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