Asymmetric Sensitivity of CEO Cash Compensation to Stock Returns
Posted: 30 Nov 2005
There are 2 versions of this paper
Asymmetric Sensitivity of CEO Cash Compensation to Stock Returns
Simon School, University of Rochester, Research Paper No. FR 06-04
Number of pages: 49
Posted: 29 Feb 2004
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Abstract
We document that CEO cash compensation is twice as sensitive to negative stock returns as it is to positive stock returns. Since stock returns include both unrealized gains and unrealized losses, we expect cash compensation to be less sensitive to stock returns when returns contain unrealized gains (positive returns) than when returns contain unrealized losses (negative returns). This is consistent with boards of directors exercising discretion to reduce costly ex post settling up in cash compensation paid to CEOs.
JEL Classification: J33, M41, M44, G34
Suggested Citation: Suggested Citation
Leone, Andrew J. and Wu, Joanna Shuang and Zimmerman, Jerold L., Asymmetric Sensitivity of CEO Cash Compensation to Stock Returns. Journal of Accounting & Economics, Forthcoming, Simon School Working Paper No. FR 06-04, Available at SSRN: https://ssrn.com/abstract=855426
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