Tournament incentives and corporate fraud

Lars Helge Hass, Maximilian A. Müller, Skrålan Vergauwe

Research output: Contribution to journalArticlepeer-review

68 Citations (Scopus)
3 Downloads (Pure)


This paper identifies a new incentive for managers to engage in corporate fraud stemming from the relative performance evaluation feature of CEO promotion tournaments. We document higher propensities to engage in fraud for firms with strong tournament incentives (as proxied for by the CEO pay gap). We posit that the relative performance evaluation feature of CEO promotion tournaments creates incentives to manipulate performance, while the option-like character can motivate managers to engage in risky activities. We thereby extend previous corporate fraud literature that focuses mainly on equity-based incentives and reports mixed findings. Our results are robust to using different fraud samples, and controlling for other known determinants of fraud as well as manager skills.
Original languageEnglish
Pages (from-to)251-267
Number of pages17
JournalJournal of Corporate Finance
Early online date18 Jul 2015
Publication statusPublished - 31 Oct 2015


  • corporate fraud
  • tournament incentives
  • CEO pay gap


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