CEO Tournaments: A Cross-Country Analysis of Causes, Cultural Influences and Consequences
58 Pages Posted: 24 Feb 2012 Last revised: 29 May 2016
Date Written: August 1, 2015
Using a cross-country sample, we examine the CEO tournament structure (measured alternatively as the ratio and the difference of pay between the CEO and other top executives within a firm). We find the tournament structure to vary systematically with firm and country cultural characteristics. In particular, firm size and the cultural values of Power distance, Fair income differences and Competition are significantly associated with variations in tournament structures. We also establish support for the primary implication of tournament theory in that tournament structure tends to be positively related to firm value, even after controlling for endogeneity.
Keywords: Executive compensation, Tournaments, International pay differences, Culture, Corporate governance
JEL Classification: G15, G3, G32, G34
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