Corporate Culture and the Tournament Hypothesis
AbstractThe empirical literature on the effect of dispersion of executive remuneration (i.e., the intensity of a tournament structure) on the comparative performance of companies is mixed. Studies on US data tend to find strong positive effects but non-US studies tend to fail to find an effect. This suggests that tournaments are likely to be more effective in some situations than others. Using UK data we are able to exploit differences between companies as they become more Â‘AmericanisedÂ’ to provide some insight into this question. In the UK there has been a change towards the use of the US terminology CEO and away from the more tradition UK nomenclature of MD. A minority of UK companies retain the terminology MD. Also in some UK companies the top executive is a US citizen. Both these may tell us something about the culture of the company. We test whether tournaments are more likely to be effective if the company calls it top executive CEO and also if there is a US CEO. We find that increasing the dispersion of remuneration is no more effective for companies with CEOs than for MDs. However, we find that the situation is different when we look at companies with US CEOs relative to the rest of the sample. Here we find that increasing the dispersion is associated with better company performance.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by School of Economics, University of East Anglia, Norwich, UK. in its series University of East Anglia Applied and Financial Economics Working Paper Series with number 017.
Date of creation: 22 Sep 2010
Date of revision:
Postal: Helen Chapman, School of Economics, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, UK
Find related papers by JEL classification:
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alasdair Brown).
If references are entirely missing, you can add them using this form.