City Research Online

Abstract

We find that the losers in CEO promotion tournaments sell their equity holdings profitably to mitigate the reductions in the promotion-based component of their contracts. They avoid selling before losing the contest to maximize their promotion probabilities. Those who are more likely to compete in the tournament and to face a greater forgone tournament prize trade more aggressively. Our results suggest that tournament losers consider their trading opportunities as outside options to compensate themselves ex-post. This strategy weakens the relationship between tournament incentives and firm performance and highlights new implications for tournament incentives models, compensation committees, and insider trading regulations.

Publication Type:	Article
Additional Information:	© 2024 The Author(s). European Financial Management published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Publisher Keywords:	Tournament Incentives; Executive Compensation; Career Outcome; Insider Trading
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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