The Executive Turnover Risk Premium

62 Pages Posted: 5 Jun 2008 Last revised: 12 Oct 2014

See all articles by Florian S. Peters

Florian S. Peters

University of Amsterdam

Alexander F. Wagner

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Date Written: September 13, 2013


We establish that CEOs of companies experiencing volatile industry conditions are more likely to be dismissed. At the same time, industry risk is, accounting for various other factors, unlikely to be associated with CEO compensation other than through dismissal risk. Using this identification strategy, we document that CEO turnover risk is significantly positively associated with compensation. This finding is important because job-risk compensating wage differentials arise naturally in competitive labor markets. By contrast, the evidence rejects an entrenchment model according to which powerful CEOs have lower job risk and at the same time secure higher compensation.

Keywords: Executive compensation, entrenchment, turnover, corporate governance

JEL Classification: D8, G34, M52

Suggested Citation

Peters, Florian S. and Wagner, Alexander F., The Executive Turnover Risk Premium (September 13, 2013). The Journal of Finance, Vol. 69 (No. 4), p. 1529-1563, August 2014., Swiss Finance Institute Research Paper No. 08-11, Available at SSRN: or

Florian S. Peters (Contact Author)

University of Amsterdam ( email )

Plantage Muidergracht 12
Amsterdam, 1018 TW

Alexander F. Wagner

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
+41 44 634 3963 (Phone)

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Swiss Finance Institute ( email )



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