The Dark Side of Industry Tournament Incentives

Huang, Qianqian; Jiang, Feng; Xie, Fei

doi:10.2139/ssrn.3478660

Cited by 6 publications

(13 citation statements)

References 52 publications

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“…In this regard, our work complements the recent work of Huang et al. (2019) who find evidence suggesting that managerial labor market incentives are associated with greater earnings management.…”

Section: Introductionsupporting

confidence: 79%

“…The positive association we document highlights a potentially important negative externality to the positive incentive effects for managerial effort and project selection that are emphasized in Coles et al (2018), and complement the results in Huang et al (2019) regarding the positive association between managerial labor market incentives and earnings management.…”

Section: Regressions Of Crash Risk On Industry Tournament Incentives (H1)supporting

confidence: 73%

“…The manager's career concerns, and the large potential payoffs to success in the labor market, provide the incentive to alter disclosure policies from first-best. In this regard, our work complements the recent work of Huang et al (2019) who find evidence suggesting that managerial labor market incentives are associated with greater earnings management.…”

supporting

confidence: 70%

“…Second, our results contribute to the research on the incentives provided by an active managerial labor market. Recent research has emphasized the importance of the incentives provided by the managerial labor market for firm performance and investment policy (Coles et al., 2018) and financial reporting policy (Huang, Jiang, & Xie, 2019). Although Coles et al.…”

Section: Introductionmentioning

confidence: 99%

“…Recent research has emphasized the importance of the incentives provided by the managerial labor market for firm performance and investment policy (Coles et al, 2018) and financial reporting policy (Huang, Jiang, & Xie, 2019).…”

mentioning

confidence: 99%

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Industry tournament incentives and stock price crash risk

Kubick

Lockhart

2020

Financial Management

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Theoretical and empirical studies argue that managerial hoarding of negative firm-specific information can result in large negative stock price corrections once the accumulated information is revealed. A managerial labor market with tournament-like progression provides managers with the incentive to withhold negative information. We find that chief executive officers with stronger incentives to progress in the managerial labor market tournament have significantly greater stock price crash risk, consistent with a greater propensity for these executives to withhold negative firm-specific information. The empirical patterns that we document suggest a negative externality to the positive incentive effects provided by the managerial labor market.

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Section: Introductionsupporting

confidence: 79%

Section: Regressions Of Crash Risk On Industry Tournament Incentives (H1)supporting

confidence: 73%

supporting

confidence: 70%

Section: Introductionmentioning

confidence: 99%

mentioning

confidence: 99%

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Industry tournament incentives and stock price crash risk

Kubick

Lockhart

2020

Financial Management

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CEO industry tournament, investor attention, and company value

Jiang,

Deng

2024

Manage Decis Econ

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Based on the emerging capital market of China, this paper uses the data of Chinese listed companies to test the market value management behavior of CEOs under the incentive of industry tournaments. The empirical results show that the CEOs industry tournament improves the value of listed companies by attracting investor attention. In the test of the incentive mechanism of the industry tournament, we find that in the samples with lower industry mobility and state ownership and where the CEO is new, retiring, or a founder, the industry pay gap has a weaker incentive effect on the CEO. In the test of the CEOs' efforts to manage investor attention, this paper finds that CEOs are incentivized to disclose more financial and nonfinancial information, increase advertising spending, and hold more shareholder meetings. Discussed with other incentives, compensation incentives and equity incentives enhance the motivational role of industry championships for CEOs. This study explores in depth the possible impact of industry tournaments on CEO behavioral decisions and also provides a new perspective for corporate to manage investor attention. This provides important reference value for corporate CEO compensation, information disclosure supervision, and investor decision‐making.

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Do CEOs' Industry Tournament Incentives Affect Stock Liquidity?

Chowdhury,

Hasan,

Luong

et al. 2024

Corporate Governance

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Research Question/IssueWe examine the relationship between CEOs' industry tournament incentives (CITI) and stock liquidity in the United States. We also examine if the effect of CITI on stock liquidity varies depending on the information‐asymmetry and corporate governance mechanisms.Research Findings/InsightsWe find that firms with stronger CITI are associated with greater stock liquidity. Exploiting the enforceability of executive noncompetition agreements across the states in the United States as a quasi‐natural experiment, we find that firms headquartered in states that introduce these agreements on average experience lower stock liquidity, suggesting a causal relation. We also find that the effect of CITI on stock liquidity is stronger among firms with severe information‐asymmetry problems, but weaker among firms with strong governance mechanisms.Theoretical/Academic ImplicationsWe extend research that examines the impacts of CEO industry tournament incentives on corporate outcomes and strategies. Our paper shows that CEO industry tournament incentives matter for stock liquidity. Our paper contributes to a large literature on the roles of CEO styles and behaviors in shaping corporate policies.Practitioner/Policy ImplicationsOur findings have several practical implications for investors, policymakers, and financial analysts. For example, our findings can help investors better understand how CEOs' compensation‐based incentives impact stock liquidity. Similarly, policymakers can use our findings to design policies that encourage CEOs to act in the best interest of their shareholders and promote market efficiency.

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The Dark Side of Industry Tournament Incentives

Cited by 6 publications

References 52 publications

Industry tournament incentives and stock price crash risk

Industry tournament incentives and stock price crash risk

CEO industry tournament, investor attention, and company value

Do CEOs' Industry Tournament Incentives Affect Stock Liquidity?

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