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Does firm life cycle have impacts on managerial promotion tournament incentives?

Author

Listed:
  • Hasibul Chowdhury

    (UQ Business School, The University of Queensland, Brisbane, QLD, Australia)

  • Syed Shams

    (School of Commerce, University of Southern Queensland, Springfield, QLD, Australia)

Abstract

We examine whether and how firm-level promotion tournament incentives for executives, measured by the pay gap between a chief executive officer (CEO) and non-CEO executives, vary in different corporate life-cycle stages. Results show that managerial tournament incentives are higher in growth and mature life-cycle stages than in introduction and decline stages. In additional analyses, we find that firms design compensation contracts for growth and mature life-cycle stages with a target to increase tournament incentives for non-CEO executives that induce managerial risk-taking behaviour, leading to high productivity and performance. JEL Classification: G30, M12

Suggested Citation

  • Hasibul Chowdhury & Syed Shams, 2021. "Does firm life cycle have impacts on managerial promotion tournament incentives?," Australian Journal of Management, Australian School of Business, vol. 46(4), pages 593-628, November.
    • Handle: RePEc:sae:ausman:v:46:y:2021:i:4:p:593-628
    DOI: 10.1177/0312896220974417
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    More about this item

    Keywords

    Firm life cycle; tournament incentives;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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