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An Ill Wind? Terrorist Attacks and CEO Compensation

73 Pages Posted: 7 Sep 2017 Last revised: 25 Sep 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: September 5, 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 causal and 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 (September 5, 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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