IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v45y2024i6p4084-4104.html
   My bibliography  Save this article

CEO industry tournament, investor attention, and company value

Author

Listed:
  • Ying Jiang
  • Xiuqi Jiang
  • Wendan Deng

Abstract

Based on the emerging capital market of China, this paper uses the data of Chinese listed companies to test the market value management behavior of CEOs under the incentive of industry tournaments. The empirical results show that the CEOs industry tournament improves the value of listed companies by attracting investor attention. In the test of the incentive mechanism of the industry tournament, we find that in the samples with lower industry mobility and state ownership and where the CEO is new, retiring, or a founder, the industry pay gap has a weaker incentive effect on the CEO. In the test of the CEOs' efforts to manage investor attention, this paper finds that CEOs are incentivized to disclose more financial and nonfinancial information, increase advertising spending, and hold more shareholder meetings. Discussed with other incentives, compensation incentives and equity incentives enhance the motivational role of industry championships for CEOs. This study explores in depth the possible impact of industry tournaments on CEO behavioral decisions and also provides a new perspective for corporate to manage investor attention. This provides important reference value for corporate CEO compensation, information disclosure supervision, and investor decision‐making.

Suggested Citation

  • Ying Jiang & Xiuqi Jiang & Wendan Deng, 2024. "CEO industry tournament, investor attention, and company value," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(6), pages 4084-4104, September.
    • Handle: RePEc:wly:mgtdec:v:45:y:2024:i:6:p:4084-4104
    DOI: 10.1002/mde.4243
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.4243
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.4243?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Stein, Jeremy C, 1988. "Takeover Threats and Managerial Myopia," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 61-80, February.
    2. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
    3. Miao, Senlin & Wen, Fenghua & Zhang, Yun, 2022. "Industry tournament incentives and the speed of leverage adjustments: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 83(C).
    4. Albuquerque, Ana M. & De Franco, Gus & Verdi, Rodrigo S., 2013. "Peer choice in CEO compensation," Journal of Financial Economics, Elsevier, vol. 108(1), pages 160-181.
    5. Ernst Fehr & Alexander Klein & Klaus M Schmidt, 2007. "Fairness and Contract Design," Econometrica, Econometric Society, vol. 75(1), pages 121-154, January.
    6. Thomas J. Chemmanur & An Yan, 2019. "Advertising, Attention, and Stock Returns," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 1-51, September.
    7. Su, Jing & Jiang, Jiaoliang & Zhang, Bingbing & Cao, Lijuan, 2023. "Industry salary gap incentive and enterprise innovation," Journal of Asian Economics, Elsevier, vol. 87(C).
    8. Tu Nguyen & Jing Zhao, 2021. "Industry tournament incentives and corporate innovation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1797-1845, October.
    9. Thomas R. Kubick & G. Brandon Lockhart, 2021. "Industry tournament incentives and stock price crash risk," Financial Management, Financial Management Association International, vol. 50(2), pages 345-369, June.
    10. Angela K. Davis & Jeremy M. Piger & Lisa M. Sedor, 2012. "Beyond the Numbers: Measuring the Information Content of Earnings Press Release Language," Contemporary Accounting Research, John Wiley & Sons, vol. 29(3), pages 845-868, September.
    11. Gibbons, Robert & Murphy, Kevin J, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 468-505, June.
    12. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-741, September.
    13. Fahlenbrach, Rüdiger, 2009. "Founder-CEOs, Investment Decisions, and Stock Market Performance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(2), pages 439-466, April.
    14. Donghua Chen & Oliver Zhen Li & Shangkun Liang, 2016. "Perk consumption as a suboptimal outcome under pay regulations," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 23(4), pages 373-399, October.
    15. Kenneth R. Ahern & Denis Sosyura, 2014. "Who Writes the News? Corporate Press Releases during Merger Negotiations," Journal of Finance, American Finance Association, vol. 69(1), pages 241-291, February.
    16. Joseph Engelberg & Caroline Sasseville & Jared Williams, 2012. "Market Madness? The Case of Mad Money," Management Science, INFORMS, vol. 58(2), pages 351-364, February.
    17. Stefano Dellavigna & Joshua M. Pollet, 2009. "Investor Inattention and Friday Earnings Announcements," Journal of Finance, American Finance Association, vol. 64(2), pages 709-749, April.
    18. Alex Edmans & Luis Goncalves-Pinto & Moqi Groen-Xu & Yanbo Wang, 2018. "Strategic News Releases in Equity Vesting Months," The Review of Financial Studies, Society for Financial Studies, vol. 31(11), pages 4099-4141.
    19. William Dilla & Diane Janvrin & Jon Perkins & Robyn Raschke, 2019. "Do environmental responsibility views influence investors’ use of environmental performance and assurance information?," Sustainability Accounting, Management and Policy Journal, Emerald Group Publishing Limited, vol. 10(3), pages 476-497, June.
    20. Graham, John R. & Harvey, Campbell R. & Rajgopal, Shiva, 2005. "The economic implications of corporate financial reporting," Journal of Accounting and Economics, Elsevier, vol. 40(1-3), pages 3-73, December.
    21. Jeffrey L Coles & Zhichuan (Frank) Li & Albert Y Wang, 2018. "Industry Tournament Incentives," The Review of Financial Studies, Society for Financial Studies, vol. 31(4), pages 1418-1459.
    22. Yilu Zhu & Ruopiao Zhang, 2023. "How local tournament incentives influence ESG disclosure: CEO’s genuinely altruistic or self-serving?," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 20(2), pages 383-404, July.
    23. Ivana Vitanova, 2022. "CEO overconfidence and corporate tournaments," Post-Print halshs-03828823, HAL.
    24. Kini, Omesh & Williams, Ryan, 2012. "Tournament incentives, firm risk, and corporate policies," Journal of Financial Economics, Elsevier, vol. 103(2), pages 350-376.
    25. Chowdhury, Hasibul & Hodgson, Allan & Pathan, Shams, 2020. "Do external labour market incentives constrain bad news hoarding? The CEO's industry tournament and crash risk reduction," Journal of Corporate Finance, Elsevier, vol. 65(C).
    26. C. Edward Fee, 2003. "Raids, Rewards, and Reputations in the Market for Managerial Talent," The Review of Financial Studies, Society for Financial Studies, vol. 16(4), pages 1315-1357.
    27. Vineet Agarwal & Richard J. Taffler & Xijuan Bellotti & Elly A. Nash, 2016. "Investor relations, information asymmetry and market value," Accounting and Business Research, Taylor & Francis Journals, vol. 46(1), pages 31-50, January.
    28. Zhang, Yongjie & An, Yahui & Feng, Xu & Jin, Xi, 2017. "Celebrities and ordinaries in social networks: Who knows more information?," Finance Research Letters, Elsevier, vol. 20(C), pages 153-161.
    29. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-488, June.
    30. Mustaruddin Saleh & Norhayah Zulkifli & Rusnah Muhamad, 2010. "Corporate social responsibility disclosure and its relation on institutional ownership: Evidence from public listed companies in Malaysia," Managerial Auditing Journal, Emerald Group Publishing, vol. 25(6), pages 591-613, June.
    31. Nofsinger, John R., 2001. "The impact of public information on investors," Journal of Banking & Finance, Elsevier, vol. 25(7), pages 1339-1366, July.
    32. Frank Fehle & Sergey Tsyplakov & Vladimir Zdorovtsov, 2005. "Can Companies Influence Investor Behaviour through Advertising? Super Bowl Commercials and Stock Returns," European Financial Management, European Financial Management Association, vol. 11(5), pages 625-647, November.
    33. Huang, Jian & Jain, Bharat A. & Kini, Omesh, 2019. "Industry Tournament Incentives and the Product-Market Benefits of Corporate Liquidity," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 54(2), pages 829-876, April.
    34. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
    35. Roger K. Loh, 2010. "Investor Inattention and the Underreaction to Stock Recommendations," Financial Management, Financial Management Association International, vol. 39(3), pages 1223-1252, September.
    36. Brad M. Barber & Terrance Odean, 2008. "All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors," The Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 785-818, April.
    37. Zhong, Xi & Ren, Liuyang & Song, Tiebo, 2021. "Different effects of internal and external tournament incentives on corporate financial misconduct: Evidence from China," Journal of Business Research, Elsevier, vol. 134(C), pages 329-341.
    38. Jiacai Xiong & Dongwei Su, 2014. "Stock liquidity and capital allocation efficiency: Evidence from Chinese listed companies," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 2(3), pages 228-252, July.
    39. Ye Wang & Fusheng Wang & Shiyu Liu, 2022. "Research on the influence of online media reports on earnings management based on the perspective on abnormal investor attention," Nankai Business Review International, Emerald Group Publishing Limited, vol. 13(3), pages 395-417, April.
    40. Nguyen, Nam H. & Phan, Hieu V. & Phan, Hung V. & Tran, Dung T.T. & Vo, Hong, 2020. "Tournament-based incentives and mergers and acquisitions," International Review of Financial Analysis, Elsevier, vol. 71(C).
    41. William Dilla & Diane Janvrin & Jon Perkins & Robyn Raschke, 2019. "Do environmental responsibility views influence investors’ use of environmental performance and assurance information?," Sustainability Accounting, Management and Policy Journal, Emerald Group Publishing Limited, vol. 10(3), pages 476-497, June.
    42. Tsai, I-Chun, 2017. "Diffusion of optimistic and pessimistic investor sentiment: An empirical study of an emerging market," International Review of Economics & Finance, Elsevier, vol. 47(C), pages 22-34.
    43. Jun Bai & Chuang Li & Shasha Li & Weiting Luo, 2021. "Compensation regulation and political promotion of executives of state-owned enterprises——Quasi-natural experiment based on the reform of compensation regulation in China," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 9(4), pages 549-570, October.
    44. Yiqing Tan, 2021. "Industry tournament incentives and audit fees," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(3-4), pages 587-612, March.
    45. Ivana Vitanova, 2022. "CEO overconfidence and corporate tournaments," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1423-1438, July.
    46. Hong Luo & Yongliang Zeng & Linyu Wan & Yali Shen, 2016. "Executive heterogeneity, pay bandwagon, and earnings management," Nankai Business Review International, Emerald Group Publishing Limited, vol. 7(4), pages 426-450, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Han, Feng & Tee, Kienpin & Hao, Siyuan & Xiong, Rancen, 2024. "Does unfairness reduce efficiency? Within-industry CEO pay inequity and firm efficiency in China," Finance Research Letters, Elsevier, vol. 62(PA).
    2. Chowdhury, Hasibul & Hossain, Ashrafee & Tan, Kelvin & Zheng, Jiayi, 2022. "Do external labor market incentives improve labor investment efficiency?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    3. Chowdhury, Hasibul & Hodgson, Allan & Hasan, Mostafa Monzur, 2022. "Does a competitive external labour market affect corporate social responsibility? Evidence from industry tournament incentives," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    4. Lingfei Kong & Gunratan Lonare & Ahmet Nart, 2022. "Industry tournament incentives and corporate innovation strategies," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 45(1), pages 124-161, March.
    5. An, Suwei, 2023. "Essays on incentive contracts, M&As, and firm risk," Other publications TiSEM dd97d2f5-1c9d-47c5-ba62-f, Tilburg University, School of Economics and Management.
    6. Zhao, Hong, 2018. "Executive labor market segmentation: How local market density affects incentives and performance," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 1-21.
    7. Miao, Senlin & Wen, Fenghua & Zhang, Yun, 2022. "Industry tournament incentives and the speed of leverage adjustments: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 83(C).
    8. Yiqing Tan, 2024. "Local Tournament Incentives and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 194(1), pages 211-228, September.
    9. Qin, Huai & Huang, Yongjian, 2024. "Industry tournament incentives and acquisition performance," Finance Research Letters, Elsevier, vol. 66(C).
    10. Anastassia Fedyk, 2024. "Front‐Page News: The Effect of News Positioning on Financial Markets," Journal of Finance, American Finance Association, vol. 79(1), pages 5-33, February.
    11. Kubick, Thomas R. & Lockhart, G. Brandon, 2016. "Do external labor market incentives motivate CEOs to adopt more aggressive corporate tax reporting preferences?," Journal of Corporate Finance, Elsevier, vol. 36(C), pages 255-277.
    12. Gunratan Lonare & Ahmet Nart & Ahmet M. Tuncez, 2022. "Industry tournament incentives and corporate hedging policies," Financial Management, Financial Management Association International, vol. 51(2), pages 399-453, June.
    13. Chowdhury, Hasibul & Hodgson, Allan & Pathan, Shams, 2020. "Do external labour market incentives constrain bad news hoarding? The CEO's industry tournament and crash risk reduction," Journal of Corporate Finance, Elsevier, vol. 65(C).
    14. Yiqing Tan, 2021. "Industry tournament incentives and audit fees," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(3-4), pages 587-612, March.
    15. Caroline Flammer & Michael W. Toffel & Kala Viswanathan, 2021. "Shareholder activism and firms' voluntary disclosure of climate change risks," Strategic Management Journal, Wiley Blackwell, vol. 42(10), pages 1850-1879, October.
    16. Ghosh, Chinmoy & Huang, Di & Nguyen, Nam H. & Phan, Hieu V., 2023. "CEO tournament incentives and corporate debt contracting," Journal of Corporate Finance, Elsevier, vol. 78(C).
    17. Thomas R. Kubick & G. Brandon Lockhart, 2021. "Industry tournament incentives and stock price crash risk," Financial Management, Financial Management Association International, vol. 50(2), pages 345-369, June.
    18. Edmans, Alex & Gosling, Tom & Jenter, Dirk, 2023. "CEO compensation: Evidence from the field," Journal of Financial Economics, Elsevier, vol. 150(3).
    19. Tu Nguyen & Jing Zhao, 2021. "Industry tournament incentives and corporate innovation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1797-1845, October.
    20. Lel, Ugur & Tepe, Mete, 2021. "Investor horizon and managerial short-termism," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 1-20.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:45:y:2024:i:6:p:4084-4104. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.