Abstract

http://ssrn.com/abstract=1571592
 
 

References (75)



 
 

Citations (5)



 


 



Tournament Incentives, Firm Risk, and Corporate Policies


Omesh Kini


Georgia State University

Ryan Williams


University of Arizona - Department of Finance

June 1, 2011

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
This paper tests the proposition that higher tournament incentives will result in greater risk taking by senior managers in order to increase their chance of promotion to the rank of CEO. Measuring tournament incentives as the pay gap between the CEO and the next layer of senior managers, we find a significantly positive relation between firm risk and tournament incentives. Further, we find that greater tournament incentives lead to higher R&D intensity, firm focus, and leverage but lower capital expenditures intensity. Our results support the hypothesis that option-like features of intra-organizational CEO promotion tournaments provide incentives to senior executives to increase firm risk by following riskier policies. Finally, the compensation levels and structures of executives of financial institutions have received a great deal of scrutiny after the financial crisis. In a separate examination of financial firms, we again find a significantly positive relation between firm risk and tournament incentives.

Number of Pages in PDF File: 60

Keywords: Tournament incentives, Firm risk, Corporate policies

JEL Classification: G31, G32, G34, J31, J33, L14

Accepted Paper Series





Download This Paper

Date posted: March 17, 2010 ; Last revised: September 1, 2011

Suggested Citation

Kini, Omesh and Williams, Ryan, Tournament Incentives, Firm Risk, and Corporate Policies (June 1, 2011). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1571592

Contact Information

Omesh Kini (Contact Author)
Georgia State University ( email )
University Plaza
Atlanta, GA 30303-3083
United States
404-651-2656 (Phone)
Ryan Williams
University of Arizona - Department of Finance ( email )
McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,112
Downloads: 230
Download Rank: 78,389
References:  75
Citations:  5

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.437 seconds