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An Ill Wind? Terrorist Attacks and CEO Compensation

69 Pages Posted: 7 Sep 2017 Last revised: 30 Oct 2017

Yunhao Dai

Huazhong University of Science and Technology

P. Raghavendra Rau

University of Cambridge

Aris Stouraitis

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences

Weiqiang Tan

Hong Kong Baptist University (HKBU) - Business

Date Written: October 29, 2017

Abstract

Using multiple measures of attack proximity, we show that CEOs employed at firms located near terrorist attacks earn an 8.8% terrorist compensation premium relative to CEOs at firms located far from attacks. CEOs at terrorist attack-proximate firms prefer cash-based compensation (e.g., salary and bonus) over equity-based compensation (e.g., options and stocks granted). The effect is not driven by endogeneity, it is causal and it is larger when the bargaining power of the CEO is higher relative to that of the firm.

Keywords: Terrorist attacks, Executive compensation, Compensation structure, CEO labor market

JEL Classification: G15, G30, G34

Suggested Citation

Dai, Yunhao and Rau, P. Raghavendra and Stouraitis, Aris and Tan, Weiqiang, An Ill Wind? Terrorist Attacks and CEO Compensation (October 29, 2017). Available at SSRN: https://ssrn.com/abstract=3032283

Yunhao Dai

Huazhong University of Science and Technology ( email )

1037 Luoyu Rd
Wuhan
China

P. Raghavendra Rau (Contact Author)

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

HOME PAGE: http://www.raghurau.com/

Aristotelis Stouraitis

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences ( email )

Hong Kong

Weiqiang Tan

Hong Kong Baptist University (HKBU) - Business ( email )

Hong Kong

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