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Tournament Structure of Managerial Pay: Evidence from the Transition Period
Author(s) -
Paligorova Teodora
Publication year - 2011
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.1543
Subject(s) - tournament , hierarchy , wage , differential (mechanical device) , competitor analysis , human capital , economics , compensation (psychology) , position (finance) , labour economics , microeconomics , organizational structure , business , management , market economy , finance , mathematics , psychology , combinatorics , psychoanalysis , engineering , aerospace engineering
This paper uses matched employer–employee data to study the structure of managerial compensation. The evidence supports key predictions from tournament theory. First, the managerial pay differential between organizational levels is non‐decreasing as one goes up the corporate ladder. This result is robust to controlling for human capital characteristics and firm fixed effects. I document a particularly large increment in the pay differential at the top of a firm's hierarchy. Second, the winner's prize in the CEO tournament increases with the number of competitors for the CEO position. Last, high wage dispersion is associated with high firm performance. Copyright © 2011 John Wiley & Sons, Ltd.