Rank-Order Tournaments and Incentive Alignment: The Effect on Firm Performance

• 成果类型: Article
• 署名作者: Kale, Jayant R.; Reis, Ebru; Venkateswaran, Anand
• 署名单位: University System of Georgia; Georgia State University; Bentley University; University System of Ohio; Miami University; Northwestern University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2009.01470.x
• 发表日期: 2009
• 页码: 1479-1512
• 关键词: compensation; succession; pay; INVESTMENT; OWNERSHIP; provision; turnover; POLICY; COSTS; LABOR

摘要

We investigate simultaneously the impact of promotion-based tournament incentives for VPs and equity-based (alignment) incentives for VPs and the chief executive officer (CEO) on firm performance. We find that tournament incentives, as measured by the pay differential between the CEO and VPs, relate positively to firm performance. The relation is more positive when the CEO nears retirement and less positive when the firm has a new CEO, and weakens further when the new CEO is an outsider. Our analysis is robust to corrections for endogeneity of all our incentive measures and to several alternative measures of tournament incentives and firm performance.