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:	This is the peer reviewed version of the following article: Lasfer, M. ORCID: 0000-0003-2338-672X & Ye, X. (2024). Executive Equity-Based Compensation and Tournament Incentives. European Financial Management, which is to be published in final form http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1468-036X. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
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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