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CEO compensation and operational risk

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  • Khalid Al-Amri

Abstract

This study examines the impact of operational risk on CEO compensation in the property-liability insurance industry. We find that property-liability CEOs are not penalised for operational risk in terms of cash-based compensation, while they are penalised in terms of their option-based compensation. Our findings also suggest that CEOs are largely insulated from firm level operational losses in terms of their total compensation. These findings have implications for implementing optimal risk-based contracting decisions for CEO compensation contracts.

Suggested Citation

  • Khalid Al-Amri, 2017. "CEO compensation and operational risk," International Journal of Business Innovation and Research, Inderscience Enterprises Ltd, vol. 12(4), pages 407-424.
  • Handle: RePEc:ids:ijbire:v:12:y:2017:i:4:p:407-424
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