2017/04/01 by Natasha Burns, Kristina Minnick, Laura T. Starks +1
Business, Management and Accounting · Social Sciences · #Corporate Finance and Governance #Culture, Economy, and Development Studies #Experimental Behavioral Economics Studies
paper · doi:10.1017/s0022109017000163
Using a cross-country sample, we examine the chief executive officer (CEO) tournament structure (measured alternatively as the ratio and the difference of pay between the CEO and other top executives within a firm). We find the tournament structure to vary systematically with firm and country cultural characteristics. In particular, firm size and the cultural values of power distance, fair income differences, and competition are significantly associated with variations in tournament structures. We also establish support for the primary implication of tournament theory in that tournament structure tends to be positively related to firm value, even after controlling for endogeneity.