Industry tournament incentives and acquisition performance

Huai Qin and Yongjian Huang

Finance Research Letters, 2024, vol. 66, issue C

Abstract: This paper examines the effect of industry tournament incentives on acquisition performance. Using the pay gap between a firm's CEO and the highest-paid CEO in the same industry as the measure of industry tournament incentives, we find that deals led by CEOs with higher industry tournament incentives experience higher abnormal announcement returns. This positive relation between industry tournament incentives and acquisition returns is more pronounced when CEOs have greater mobility and probability of winning the tournament prize. Our findings highlight those tournament incentives induced by the external labor market play important roles in corporate acquisitions.

Keywords: Mergers; Acquisition; CEO incentives; Industry tournament incentives (search for similar items in EconPapers)
JEL-codes: G34 G41 M52 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:66:y:2024:i:c:s1544612324006883

DOI: 10.1016/j.frl.2024.105658

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