Affiliation:
1. Fordham University, University of Sydney, and Bank of Finland
2. University of Technology Sydney
3. University of Sydney
Abstract
Abstract
This paper examines the impact of promotion-based tournament incentives on corporate acquisition performance. Measuring tournament incentives as the compensation ratio between the CEO and other senior executives, we show that acquirers with greater tournament incentives experience lower announcement returns. Further analysis shows that the negative effect is driven by the risk-seeking behavior of senior executives induced by tournament incentives. Our results are robust to alternative identification strategies. Our evidence highlights that senior executives, in addition to the CEO, play an influential role in acquisition decisions. (JEL G30, G34, G41, J31, J33, J62)
Received: November 5, 2018; editorial decision January 6, 2020 by Editor Isil Erel.
Publisher
Oxford University Press (OUP)
Subject
Economics and Econometrics,Finance,Business and International Management
Cited by
12 articles.
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