We investigate the consequences for non-promoted executives (NPEs) in CEO tournaments. We find that NPEs' total incentives decrease following the end of a tournament based on evidence of their reduced future promotion prospects and limited adjustments to their compensation. Consistent with the theory that NPEs leave in response to this loss in incentives, results indicate that turnover is higher for NPEs who: (1) are ex ante more competitive for promotion, (2) compete in open tournaments without an heir apparent versus closed tournaments with an heir apparent winner, and (3) compete in tournaments with an outsider versus insider winner. Departed NPEs' subsequent career outcomes suggest that the labor market assesses NPEs who leave after open tournaments more favorably than those who leave after closed tournaments and tournaments with an outsider winner. Overall, evidence suggests that promotion tournaments can weed out low-quality managers, but also cause the unintended turnover of high-quality managers.

JEL Classifications: J01; M12; M41; M51.

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