A shock to CEOs' external environment: terrorist attacks and CEO pay

Rebecca Bachmann; Anna Bedford; Samir Ghannam; Jin Sug Yang

doi:10.1016/j.pacfin.2023.101935

A shock to CEOs' external environment: terrorist attacks and CEO pay

Rebecca Bachmann, Anna Bedford, Samir Ghannam, Jin Sug Yang

Department of Accounting and Corporate Governance

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7 Citations (Scopus)

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Abstract

We examine whether CEO compensation increases in firms located near a terrorist attack. We first replicate and confirm the findings of Dai et al. (2020) in the US setting using the original sample and an extended sample. Consistent with Dai et al. (2020) we document a causal link between terrorist attack proximity and CEO compensation, suggesting that CEOs use their bargaining power to extract additional compensation after a deterioration in their external environment. When we extend this analysis to the Australian setting, we find a positive association between CEO compensation and terrorist attack proximity, only for CEOs with higher bargaining power. Specifically, we find that Australian CEOs negotiate higher compensation after a terrorist attack when (i) board monitoring is weak and consists of majority non-independent directors and (ii) the local executive labor market provides more employment opportunities to the CEO.

Original language	English
Article number	101935
Pages (from-to)	1-10
Number of pages	10
Journal	Pacific-Basin Finance Journal
Volume	77
Early online date	11 Jan 2023
DOIs	https://doi.org/10.1016/j.pacfin.2023.101935 https://doi.org/10.1016/j.pacfin.2023.101935
Publication status	Published - Feb 2023

Bibliographical note

© 2023 The Authors. Published by Elsevier B.V. Version archived for private and non-commercial use with the permission of the author/s and according to publisher conditions. For further rights please contact the publisher.

Keywords

Terrorist attacks
CEO compensation
Board independence
Executive labor market

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Publisher version (open access)Final published version, 644 KBLicence: CC BY

Cite this

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abstract = "We examine whether CEO compensation increases in firms located near a terrorist attack. We first replicate and confirm the findings of Dai et al. (2020) in the US setting using the original sample and an extended sample. Consistent with Dai et al. (2020) we document a causal link between terrorist attack proximity and CEO compensation, suggesting that CEOs use their bargaining power to extract additional compensation after a deterioration in their external environment. When we extend this analysis to the Australian setting, we find a positive association between CEO compensation and terrorist attack proximity, only for CEOs with higher bargaining power. Specifically, we find that Australian CEOs negotiate higher compensation after a terrorist attack when (i) board monitoring is weak and consists of majority non-independent directors and (ii) the local executive labor market provides more employment opportunities to the CEO.",

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AU - Ghannam, Samir

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KW - Board independence

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A shock to CEOs' external environment: terrorist attacks and CEO pay

Abstract

Bibliographical note

Keywords

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