Title
Executive Compensation: Does Industry Risk Matter?
Abstract
Prior studies of the role of risk in executive compensation focus on market risk and firm risk, neglecting the role of industry risk in explaining executive compensation. We include industry risk and find that the portion of CEO compensation for bearing industry risk is greater than the portion of CEO compensation for bearing market risk. Consistent with the human capital of a CEO being non-diversifiable, CEOs also receive compensation for bearing firm-specific risk, in contrast to investors, who can diversify their risk over many assets. CEOs are compensated for bearing firm-specific risks through all the compensation tools we examine; salary, bonus, option grants and option exercises. CEOs are compensated for bearing market and industry risk primarily through stock option grants.
Department(s)
Finance and General Business
Document Type
Article
DOI
https://doi.org/10.1108/ijotb-11-04-2008-b001
Publication Date
2008
Recommended Citation
Haggard, Dana L., and K. Stephen Haggard. "Executive compensation: does industry risk matter?." International Journal of Organization Theory & Behavior (PrAcademics Press) 11, no. 4 (2008).
Journal Title
International Journal of Organization Theory and Behavior
