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

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  • Bachmann, Rebecca L.
  • Bedford, Anna
  • Ghannam, Samir
  • Yang, Jin Sug

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.

Suggested Citation

  • Bachmann, Rebecca L. & Bedford, Anna & Ghannam, Samir & Yang, Jin Sug, 2023. "A shock to CEOs' external environment: terrorist attacks and CEO pay," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:pacfin:v:77:y:2023:i:c:s0927538x2300001x
    DOI: 10.1016/j.pacfin.2023.101935
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    References listed on IDEAS

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    More about this item

    Keywords

    Terrorist attacks; CEO compensation; Board independence; Executive labor market;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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