CEO Compensation and Real Estate Prices: Pay for Luck and Responses to Luck
56 Pages Posted: 12 Aug 2015 Last revised: 11 Jan 2018
Date Written: January 10, 2018
We use changes in real estate prices to study the sensitivity of CEO compensation to luck and to responses to luck. Pay for luck can be optimal when CEOs are expected to react to luck. To identify responses to luck we rely on the fact that accounting performance, unlike market performance, only reflects changes to real estate prices if the CEO responds to the real estate shocks. We show that CEO compensation is linked to responses to real estate luck, which can partially explain pay for luck.
Keywords: CEO compensation; pay for luck; real estate shocks
JEL Classification: G34, J31
Suggested Citation: Suggested Citation