TY - UNPB
T1 - Motivating Collusion
AU - Ha, Sangeun
AU - Ma, Fangyuan
AU - Žaldokas, Alminas
PY - 2022
Y1 - 2022
N2 - We examine how executive compensation can be designed to motivate product market collusion. We look at the 2013 decision to close several regional offices of the Department of Justice, which lowered antitrust enforcement for firms located near these closed offices. We argue that this made collusion more appealing to the shareholders, and find that these firms increased the sensitivity of executive pay to local rivals' performance, consistent with rewarding the managers for colluding with them. The affected CEOs were also granted more equity compensation, which provides long-term incentives that could foster collusive arrangements.
AB - We examine how executive compensation can be designed to motivate product market collusion. We look at the 2013 decision to close several regional offices of the Department of Justice, which lowered antitrust enforcement for firms located near these closed offices. We argue that this made collusion more appealing to the shareholders, and find that these firms increased the sensitivity of executive pay to local rivals' performance, consistent with rewarding the managers for colluding with them. The affected CEOs were also granted more equity compensation, which provides long-term incentives that could foster collusive arrangements.
KW - Product market collusion
KW - Corporate governance
KW - Managerial compensation
KW - Product market collusion
KW - Corporate governance
KW - Managerial compensation
M3 - Working paper
T3 - HKUST Business School Research Paper
BT - Motivating Collusion
PB - The Hong Kong University of Science and Technology
CY - Hong Kong
ER -