Management Accounting Section Midyear Meeting

When and Where Does the Tournament Prize Matter?

• In Event: Control Systems (Archival)

Abstract

Despite a significant body of literature on the incentive effect of tournament prize spreads,
empirical evidence on the incentive effect of winning probability is scant. Using unique
disclosures of average pay across different job levels in South Korean firms, we examine the
role of promotion probability in corporate tournaments and find that the positive effect of prize spreads on subsequent firm performance becomes stronger as promotion probability increases. To examine how the strength of incentives varies across different levels of corporate hierarchy, we divide the corporate tournament into top-middle and middle-bottom tournaments and find that tournaments at the upper layer have stronger effects on firm performance.

Authors

• Sang Woo Ahn, Seoul National University

• Jeong-Hoon Hyun, NEOMA Business School

• Jae Yong Shin, Seoul National University