We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Impact of Tournament Incentives on Management Earnings Forecasts.
- Authors
Cheng, Xin; Palmon, Dan; Yang, Yinan; Yin, Cheng
- Abstract
This paper examines how rank-order tournament incentives in the top management team (TMT) influence the quality of management earnings forecasts (MEFs). Instead of breeding feelings of inequality and fostering peer sabotage, the large pay gap between the CEO and subordinates may motivate top executives to issue more accurate and precise forecasts to win the prize of promotion. The positive tournament effect on the quality of MEFs is weakened (strengthened) when the perceived probability of promotion for candidates is low (high). We find that firms with higher tournament incentives are more likely to issue supplementary forecasts to increase the credibility of MEFs. By examining the tournament effect at each subordinate manager level, we find that CFOs are the driving force in controlling the frequency and quality of management forecasts and chief marketing officers (CMOs) may also contribute to the quality of management forecasts. The results are robust to multiple measures of tournament incentives and multiple research designs.
- Subjects
EARNINGS management; EARNINGS forecasting; INCENTIVE (Psychology); SENIOR leadership teams; CHIEF financial officers; CHIEF marketing officers
- Publication
Journal of Accounting, Auditing & Finance, 2024, Vol 39, Issue 1, p225
- ISSN
0148-558X
- Publication type
Article
- DOI
10.1177/0148558X211055883