Winners and losers of corporate tournaments

Ian Gregory-Smith () and Peter Wright

No 2016010, Working Papers from The University of Sheffield, Department of Economics

Abstract: In a corporate tournament, executive directors are motivated by the prospect of promotion to CEO, with winners receiving large increases in remuneration. Tournament losers by contrast face a discrete loss in their valuation of their position, since the prospect of them becoming CEO is substantially reduced. We argue that this offers an opportunity to test the predictions of tournament theory by observing the quit behavior and the wages of the losing directors. We find a sharp increase in the likelihood that directors leave the firm. The directors who remain receive an increase in their remuneration following a rival’s promotion.

Keywords: corporate succession; executive remuneration; tournament theory (search for similar items in EconPapers)
JEL-codes: J30 J31 J32 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2016-12
New Economics Papers: this item is included in nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.sheffield.ac.uk/economics/research/serps/articles/2016_010 First version, December 2016 (application/pdf)

Related works:
Journal Article: Winners and losers of corporate tournaments (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2016010

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