Relative Performance Evaluation and Strategic Competition

• 成果类型: Article; Early Access
• 署名作者: He, Li; Whited, Toni M.; Guo, Ran
• 署名单位: Indiana University System; Indiana University Bloomington; University of Michigan System; University of Michigan; National Bureau of Economic Research; Shanghai Jiao Tong University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454; 1465-7368
• DOI: 10.1093/rfs/hhaf028
• 发表日期: 2025-10-26
• 关键词: G34; L13; L93; executive-compensation; moral hazard; estimators; turnover; models; games; RISK

摘要

We examine how relative performance evaluation (RPE) affects industry competition-a question relevant for corporate boards interested in incentivizing executives. Using U.S. airline data, we estimate a dynamic game of competition between heterogeneous firms in an oligopolistic market, with managers incentivized by RPE contracts. While RPE can induce a firm to compete more intensely by smoothing compensation, it also amplifies a firm's cost efficiency relative to its peers and can weaken competition from inefficient firms. The first effect dominates in small markets and the second in median-sized markets. RPE has little effect in large, highly profitable markets.