Document Type

Article

Publication Date

10-2020

Abstract

This research examines the relation between tournament-based incentives, which are proxied by the difference between a firm’s CEO pay and the median pay of the senior managers, and mergers and acquisitions (M&As). We find that tournament-based incentives are positively related to firm acquisitiveness and acquiring firms’ stock and operating performance. Further analysis indicates that positive acquisition performance increases the likelihood of the CEO being promoted from inside the acquiring firm. Our evidence is consistent with the view that tournament-based incentives motivate acquiring firms’ managers to make greater efforts and take more risk that result in superior acquisition performance.

Comments

© 2020 Published by Elsevier Inc. Original published version available at https://doi.org/10.1016/j.irfa.2020.101548

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Publication Title

International Review of Financial Analysis

DOI

10.1016/j.irfa.2020.101548

Included in

Finance Commons

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