We show that firms’ Delta incentives can predict the market performance of their industry peers. When a small group of firms (leader firms) experiences substantial growth in Delta incentives, industry peers experience positive abnormal returns and abnormal improvement in fundamentals despite having no significant change in Delta. Further, we provide evidence that the abnormal returns are induced by peer CEOs’ extra effort in response to the increasing competitive pressure caused by leader firms. To mitigate their competitive pressure and turnover threat, peer CEOs allocate their extra effort to increase the firms’ operating efficiency and product differentiation.