The Impact of Risk on CEO Equity Incentives: Evidence from Customer Concentration
59 Pages Posted: 14 Oct 2011 Last revised: 20 Jun 2014
Date Written: April 11, 2014
This paper provides new empirical insights on the association between a firm’s operating structure and the level of CEO equity incentives. We investigate a sample of supplier firms that rely on a few large customers for a significant fraction of their revenues. We predict that suppliers with a higher customer concentration face higher idiosyncratic risk and, as a result, rely less on equity-based managerial incentive compensation contracts. Our empirical results support these predictions.
Keywords: CEO, Compensation, Major Customers, Incentives, Risk, Suppliers
JEL Classification: G30, D81, M40
Suggested Citation: Suggested Citation