A Model of Industry Tournament Incentives

19 Pages Posted: 25 Feb 2020

See all articles by Jeffrey L. Coles

Jeffrey L. Coles

University of Utah - Department of Finance

Zhichuan Frank Li

University of Western Ontario - Ivey School of Business

Yan Albert Wang

Auburn University

Date Written: January 30, 2020

Abstract

This paper builds on Rosen (1981) and Hvide (2002) to provide a simple framework that elucidates the nature of incentives in the tournaments among top executives in both the external managerial labor market for the top executive positions in other companies and within the executives’ own firm for the top internal position. In doing so, the model provides a formal foundation for the empirical evidence in Kale Reis, and Venkataswaran (2009), Kini and Williams (2012), and Coles, Li, and Wang (2018, 2017) and is suggestive of the nature of tournament incentives among mutual fund managers (Brown, Harlow, and Starks, 1996).

Keywords: tournament incentives, firm performance, risk, and policy; industry tournament incentives, managerial incentives, managerial labor markets, internal labor markets and promotion

JEL Classification: G31, G32, G34, J31, J33, L25

Suggested Citation

Coles, Jeffrey L. and Li, Zhichuan Frank and Wang, Yan Albert, A Model of Industry Tournament Incentives (January 30, 2020). Available at SSRN: https://ssrn.com/abstract=3528738 or http://dx.doi.org/10.2139/ssrn.3528738

Jeffrey L. Coles

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-587-9093 (Phone)

Zhichuan Frank Li (Contact Author)

University of Western Ontario - Ivey School of Business ( email )

1151 Richmond Street North
London Ontario, Ontario N6A 3K7
Canada

Yan Albert Wang

Auburn University ( email )

315 Lowder Hall
Department of Finance
Auburn, AL 36849
United States

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