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A note on CEO compensation, elimination tournaments and bankruptcy risk


  • Guido Friebel


  • Alexander Matros



We investigate an economy in which firms have different risks to go bankrupt. We observe two things: first, workers in firms with higher bankruptcy risk (bad firms) always work less than workers in good firms. Second, the CEOs of bad firms may nonetheless receive larger wages. Copyright Springer-Verlag Berlin/Heidelberg 2005

Suggested Citation

  • Guido Friebel & Alexander Matros, 2005. "A note on CEO compensation, elimination tournaments and bankruptcy risk," Economics of Governance, Springer, vol. 6(2), pages 105-111, July.
  • Handle: RePEc:spr:ecogov:v:6:y:2005:i:2:p:105-111 DOI: 10.1007/s10101-005-0104-3

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    References listed on IDEAS

    1. de Groot, Hans, 1988. "Decentralization decisions in bureaucracies as a principal-agent problem," Journal of Public Economics, Elsevier, vol. 36(3), pages 323-337, August.
    2. Tirole, Jean, 1994. "The Internal Organization of Government," Oxford Economic Papers, Oxford University Press, vol. 46(1), pages 1-29, January.
    3. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    4. Eckhard Janeba & Horst Raff, 1997. "Should the Power to Redistribute Income be (De-)Centralized? An Example," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(4), pages 453-461, November.
    5. Silva, Emilson C. D. & Caplan, Arthur J., 1997. "Transboundary Pollution Control in Federal Systems," Journal of Environmental Economics and Management, Elsevier, vol. 34(2), pages 173-186, October.
    6. Persson, Torsten & Tabellini, Guido, 1994. "Does centralization increase the size of government?," European Economic Review, Elsevier, vol. 38(3-4), pages 765-773, April.
    7. Gilbert, Guy & Picard, Pierre, 1996. "Incentives and optimal size of local jurisdictions," European Economic Review, Elsevier, vol. 40(1), pages 19-41, January.
    8. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
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    Cited by:

    1. Kräkel, Matthias & Nieken, Petra, 2015. "Relative performance pay in the shadow of crisis," European Economic Review, Elsevier, vol. 74(C), pages 244-268.
    2. Berardi, Nicoletta & Seabright, Paul, 2011. "Professional Network and Career Coevolution," TSE Working Papers 11-258, Toulouse School of Economics (TSE).
    3. repec:pit:wpaper:373 is not listed on IDEAS
    4. Timothy Mathews & Soiliou Namoro, 2008. "Participation incentives in rank order tournaments with endogenous entry," Journal of Economics, Springer, vol. 95(1), pages 1-23, October.

    More about this item


    Tournaments; agency; incentives; compensation;


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