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Industry tournament incentives and acquisition performance

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  • Qin, Huai
  • Huang, Yongjian

Abstract

This paper examines the effect of industry tournament incentives on acquisition performance. Using the pay gap between a firm's CEO and the highest-paid CEO in the same industry as the measure of industry tournament incentives, we find that deals led by CEOs with higher industry tournament incentives experience higher abnormal announcement returns. This positive relation between industry tournament incentives and acquisition returns is more pronounced when CEOs have greater mobility and probability of winning the tournament prize. Our findings highlight those tournament incentives induced by the external labor market play important roles in corporate acquisitions.

Suggested Citation

  • Qin, Huai & Huang, Yongjian, 2024. "Industry tournament incentives and acquisition performance," Finance Research Letters, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finlet:v:66:y:2024:i:c:s1544612324006883
    DOI: 10.1016/j.frl.2024.105658
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    References listed on IDEAS

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    More about this item

    Keywords

    Mergers; Acquisition; CEO incentives; Industry tournament incentives;
    All these keywords.

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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