An Ill Wind? Terrorist Attacks and CEO Compensation

51 Pages Posted: 7 Sep 2017 Last revised: 9 Oct 2018

See all articles by Yunhao Dai

Yunhao Dai

Huazhong University of Science and Technology (Formerly Tongi Medical University)

P. Raghavendra Rau

University of Cambridge

Aris Stouraitis

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

Weiqiang Tan

Education University of Hong Kong

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2018

Abstract

Using multiple measures of attack proximity, we show that CEOs employed at firms located near terrorist attacks earn an average pay increase of 12% after the attack relative to CEOs at firms located far from attacks. CEOs at terrorist attack-proximate firms prefer cash-based compensation increases (e.g., salary and bonus) over equity-based compensation (e.g., options and stocks granted). The effect is causal and it is larger when the bargaining power of the CEO is high. Other executives and workers do not receive a terrorist attack premium.

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, Aristotelis and Tan, Weiqiang, An Ill Wind? Terrorist Attacks and CEO Compensation (October 1, 2018). Available at SSRN: https://ssrn.com/abstract=3032283 or http://dx.doi.org/10.2139/ssrn.3032283

Yunhao Dai

Huazhong University of Science and Technology (Formerly Tongi Medical University) ( email )

1037 Luoyu Rd
Wuhan, Hubei 430074
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

Education University of Hong Kong ( email )

Dept of Social Sciences
Education University of Hong Kong
Tai Po, NT 11111
Hong Kong

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