Talavera, O., Yin, S. and Zhang, M. (2021) Tournament incentives, age diversity and firm performance. Journal of Empirical Finance, 61. pp. 139-162. ISSN 0927-5398
Abstract
This study introduces a new dimension, age diversity of non-CEO executives, which moderates the relationship between promotion-based tournament incentives, measured as the pay gap between the CEO and non-CEO executives, and firm performance. For a sample of Chinese listed firms from 2005 to 2015, we find that the tournament incentives for non-CEO executives relate positively to firm performance. This relationship is weaker when non-CEO executives are from different age cohorts, whereas the tournament effect is enhanced when non-CEO executives are from the same age cohort. The negative moderation effect of age diversity is more pronounced in state firms and in the Northern China Plain cultural region. The negative moderation effect disappears in firms with CEOs who have overseas experience. We reason that the peer pressure among the similar-aged non-CEO executives enhances the tournament competition and that age hierarchy reduces incentives for younger executives to compete. Our findings have important implications for firms not only in China, but also in countries and regions where seniority is highly valued when setting executive compensation and optimizing organizational structure.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2021 Elsevier B.V. This is an author produced version of a paper subsequently published in Journal of Empirical Finance. Uploaded in accordance with the publisher's self-archiving policy. Article available under the terms of the CC-BY-NC-ND licence (https://creativecommons.org/licenses/by-nc-nd/4.0/). |
Keywords: | Executive compensation; Tournament effect; Non-CEO executives; Age diversity; Seniority |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Management School (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 29 Jan 2021 11:03 |
Last Modified: | 21 Jul 2022 00:13 |
Status: | Published |
Publisher: | Elsevier BV |
Refereed: | Yes |
Identification Number: | 10.1016/j.jempfin.2021.01.003 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:170584 |