Symmetry in Pay for Luck

Review of Financial Studies, Forthcoming

Fox School of Business Research Paper Forthcoming

43 Pages Posted: 11 Oct 2012 Last revised: 26 Aug 2019

See all articles by Naveen D. Daniel

Naveen D. Daniel

Drexel University - Department of Finance

Lily Li

Temple University - Department of Finance

Lalitha Naveen

Temple University - Department of Finance

Date Written: March 7, 2019

Abstract

In this study, we take a comprehensive look at asymmetry in pay for luck, which is the finding that CEOs are rewarded for good luck, but are not penalized to the same extent for bad luck. Our main takeaway –– based on over 200 different specifications –– is that there is no asymmetry in pay for luck. Our finding is important given that the literature widely accepts the idea of asymmetry in pay for luck and typically points to this as evidence of rent extraction.

Keywords: Asymmetry in Pay for Luck, Pay for Luck, Relative Performance Evaluation, Pay-for-Performance, Compensation, Incentive Alignment

JEL Classification: G32, G34

Suggested Citation

Daniel, Naveen D. and Li, Lily Yuanzhi and Naveen, Lalitha, Symmetry in Pay for Luck (March 7, 2019). Review of Financial Studies, Forthcoming ; Fox School of Business Research Paper Forthcoming. Available at SSRN: https://ssrn.com/abstract=2160015 or http://dx.doi.org/10.2139/ssrn.2160015

Naveen D. Daniel

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215-895-5858 (Phone)
215-895-2955 (Fax)

HOME PAGE: http://lebow.drexel.edu/Faculty/DanielN

Lily Yuanzhi Li

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States

Lalitha Naveen (Contact Author)

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-6435 (Phone)

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