Corporate tournaments

This study examines aspects of pay and promotion in corporate hierarchies i n the context of tournament theory. Evidence supports the tournament perspe ctive in that most positions are filled through promotion and pay rises str ongly with hierarchical level. Furthermore, the winner's prize in the CEO t ournament increases with the number of competitors for the CEO position. No t all evidence is supportive: the square of the number of competitors is ne gatively associated with the CEO prize. Additionally, firms do not appear t o maintain shortterm promotion incentives, as lengthier time in position pr ior to a promotion reduces the pay increase from the promotion.