Home > Research > Publications & Outputs > Tournament incentives and corporate fraud

Electronic data

  • Tournament incentives and corporate fraud_ssrn

    Rights statement: This is the author’s version of a work that was accepted for publication in Journal of Corporate Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Corporate Finance, 34, 2015 DOI: 10.1016/j.jcorpfin.2015.07.008

    Accepted author manuscript, 746 KB, PDF document

    Available under license: CC BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License

Links

Text available via DOI:

View graph of relations

Tournament incentives and corporate fraud

Research output: Contribution to journalJournal article

Published
<mark>Journal publication date</mark>10/2015
<mark>Journal</mark>Journal of Corporate Finance
Volume34
Number of pages17
Pages (from-to)251-267
Publication statusPublished
Early online date18/07/15
Original languageEnglish

Abstract

This paper identifies a new incentive for managers to engage in corporate fraud stemming from the relative performance evaluation feature of CEO promotion tournaments. We document higher propensities to engage in fraud for firms with strong tournament incentives (as proxied for by the CEO pay gap). We posit that the relative performance evaluation feature of CEO promotion tournaments creates incentives to manipulate performance, while the option-like character can motivate managers to engage in risky activities. We thereby extend previous corporate fraud literature that focuses mainly on equity-based incentives and reports mixed findings. Our results are robust to using different fraud samples, and controlling for other known determinants of fraud as well as manager skills.

Bibliographic note

This is the author’s version of a work that was accepted for publication in Journal of Corporate Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Corporate Finance, 34, 2015 DOI: 10.1016/j.jcorpfin.2015.07.008