Industry Tournament Incentives

Authors

Zhichuan LiFollow

Document Type

Article

Publication Date

4-2018

Volume

31

Issue

4

Journal

The Review of Financial Studies

URL with Digital Object Identifier

https://doi:10.1093/rfs/hhx064

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.