The Executive Turnover Risk Premium

Florian S. Peters and Alexander Wagner
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Florian S. Peters: Duisenberg school of finance, University of Amsterdam

Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We establish that CEOs of companies experiencing volatile industry conditions are more likely tobe dismissed. At the same time, industry risk is, controlling for various other factors, unlikelyto be directly associated with CEO compensation other than through dismissal risk. Using thisidentification strategy, we document that CEO turnover risk is significantly positively associatedwith compensation. This finding is important because job-risk compensating wage differentials arisenaturally in competitive labor markets. By contrast, the evidence rejects a simple entrenchmentmodel according to which powerful CEOs have lower job risk and at the same time secure highercompensation.

Keywords: CEO turnover; CEO Compensation; Corporate Governance (search for similar items in EconPapers)
JEL-codes: D8 G34 M52 (search for similar items in EconPapers)
Date: 2012-03-08
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The Executive Turnover Risk Premium (2014)
Working Paper: The executive turnover risk premium (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20120021

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