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Industry tournament incentives and differential risk taking

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  • Hussein Abdoh

Abstract

This study examines how industry tournament incentives affect chief executive officers' (CEOs') attitudes toward differential risk‐taking. The results show that these incentives cause a greater increase in taking systematic rather than idiosyncratic risks. Furthermore, this differential risk‐taking manifests in a competitive business environment. The findings hold robust to the instrumental variable approach and variation in industry pay gap following the adoption of FAS123R. Overall, the results suggest that the industry pay gap effectively increases CEOs' systematic risk‐taking, especially in competitive industries.

Suggested Citation

  • Hussein Abdoh, 2023. "Industry tournament incentives and differential risk taking," Review of Financial Economics, John Wiley & Sons, vol. 41(3), pages 219-241, July.
    • Handle: RePEc:wly:revfec:v:41:y:2023:i:3:p:219-241
    DOI: 10.1002/rfe.1173
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    References listed on IDEAS

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