An ill wind? Terrorist attacks and CEO compensation

Yunhao Dai; P. Raghavendra Rau; Aris Stouraitis; Weiqiang Tan

doi:10.1016/j.jfineco.2019.06.005

An ill wind? Terrorist attacks and CEO compensation

Yunhao Dai, P. Raghavendra Rau^*, Aris Stouraitis, Weiqiang Tan

^*Corresponding author for this work

Research output: Contribution to journal › Journal article › peer-review

103 Citations (Scopus)

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.

Original language	English
Pages (from-to)	379-398
Number of pages	20
Journal	Journal of Financial Economics
Volume	135
Issue number	2
DOIs	https://doi.org/10.1016/j.jfineco.2019.06.005
Publication status	Published - Feb 2020

User-Defined Keywords

CEO labor market
Compensation structure
Executive compensation
Nonmonetary compensation
Terrorist attacks

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jfineco.2019.06.005

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title = "An ill wind? Terrorist attacks and CEO compensation",

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 = "CEO labor market, Compensation structure, Executive compensation, Nonmonetary compensation, Terrorist attacks",

author = "Yunhao Dai and Rau, {P. Raghavendra} and Aris Stouraitis and Weiqiang Tan",

note = "Funding Information: We thank an anonymous referee, Kee-Hong Bae, Claudia Custodio, Mustafa Leeq, Christoph Loch, Ernst Maug, Sucheta Nadkarni, participants at the Asian Finance Association 2018 Annual Meeting in Tokyo, and the International Finance Symposium 2018 in Kissamos for comments on earlier drafts. Dai is grateful for financial support from the National Natural Science Foundation of China (Grant no. 71702061). Tan is grateful for research support from the Faculty Research Grant of Hong Kong Baptist University. Publisher copyright: {\textcopyright} 2019 Elsevier B.V. All rights reserved.",

year = "2020",

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doi = "10.1016/j.jfineco.2019.06.005",

language = "English",

volume = "135",

pages = "379--398",

journal = "Journal of Financial Economics",

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T1 - An ill wind? Terrorist attacks and CEO compensation

AU - Dai, Yunhao

AU - Rau, P. Raghavendra

AU - Stouraitis, Aris

AU - Tan, Weiqiang

N1 - Funding Information: We thank an anonymous referee, Kee-Hong Bae, Claudia Custodio, Mustafa Leeq, Christoph Loch, Ernst Maug, Sucheta Nadkarni, participants at the Asian Finance Association 2018 Annual Meeting in Tokyo, and the International Finance Symposium 2018 in Kissamos for comments on earlier drafts. Dai is grateful for financial support from the National Natural Science Foundation of China (Grant no. 71702061). Tan is grateful for research support from the Faculty Research Grant of Hong Kong Baptist University. Publisher copyright: © 2019 Elsevier B.V. All rights reserved.

PY - 2020/2

Y1 - 2020/2

N2 - 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.

AB - 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.

KW - CEO labor market

KW - Compensation structure

KW - Executive compensation

KW - Nonmonetary compensation

KW - Terrorist attacks

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U2 - 10.1016/j.jfineco.2019.06.005

DO - 10.1016/j.jfineco.2019.06.005

M3 - Journal article

AN - SCOPUS:85067645370

SN - 0304-405X

VL - 135

SP - 379

EP - 398

JO - Journal of Financial Economics

JF - Journal of Financial Economics

IS - 2

ER -

An ill wind? Terrorist attacks and CEO compensation

Abstract

User-Defined Keywords

UN SDGs

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