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Risk taking in tournaments

Michael Melton (Assistant Professor of Finance, University of Southern Mississippi, Hattiesburg)
Thomas S. Zorn (The George B. Cook/Ameritas College Professor of Finance and the J.D. Edwards College Professor, University of Nebraska‐Lincoln, Lincoln)

Managerial Finance

ISSN: 0307-4358

Article publication date: 1 July 2000

Abstract

Tournament theory provides important insights into organizational reward systems. It examines the incentive properties of reward systems based on rank‐order rather than absolute individual performance. Tournament theory may explain the pattern of managerial pay. It may also explain risk‐taking behavior by mutual fund managers. We use data from the PGA tour to examine the pattern of risk‐taking by professional golfers in an explicit tournament. The PGA tour provides a natural laboratory where such behavior can be studied. Our evidence shows that behavior by players in golf tournaments is consistent with the predictions of tournament theory.

Keywords

Citation

Melton, M. and Zorn, T.S. (2000), "Risk taking in tournaments", Managerial Finance, Vol. 26 No. 7, pp. 52-62. https://doi.org/10.1108/03074350010766792

Publisher

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MCB UP Ltd

Copyright © 2000, MCB UP Limited