Industry Tournament Incentives

Jeffrey Coles, Zhichuan (Frank) Li and Albert Y Wang

The Review of Financial Studies, 2018, vol. 31, issue 4, 1418-1459

Abstract: We empirically assess industry tournament incentives for CEOs, as measured by the compensation gap between a CEO at one firm and the highest-paid CEO among similar (industry, size) firms. We find that firm performance, firm risk, and the riskiness of firm investment and financial policies are positively associated with the external industry pay gap. The industry tournament effects are stronger when industry, firm, and executive characteristics indicate high CEO mobility and a higher probability of the aspirant executive winning. Received October 21, 2012; editorial decision March 26, 2017 by Editor Laura Starks.

Date: 2018
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