TY - JOUR T1 - The Effect of Competition on Executive Compensation and Incentives JF - Journal of Human Resources JO - J Hum Resour SP - 783 LP - 824 DO - 10.3368/jhr.53.3.0215-6963R1 VL - 53 IS - 3 AU - Ana P. Fernandes AU - Priscila Ferreira AU - L. Alan Winters Y1 - 2018/07/01 UR - http://jhr.uwpress.org/content/53/3/783.abstract N2 - This paper studies the effect of increased product market competition on executive compensation and incentives. We use a reform that simplified firm entry regulation in Portugal as a quasi-natural experiment and exploit its staggered implementation across municipalities for identification. Using employer–employee data, we find that increased competition following the reform raised total pay but reduced the sensitivity of pay to firm performance. This is consistent with theoretical results showing that a fall in entry costs weakens managerial incentive provision. Entry deregulation also increased performance-induced CEO turnover and firms’ probability of exit, suggesting that competition provides direct incentives for managerial effort. ER -