CEO Compensation and Risk-Taking: Evidence from Listed European Hotel Firms

6533b82efe1ef96bd129304d

RESEARCH PRODUCT

CEO Compensation and Risk-Taking: Evidence from Listed European Hotel Firms

Alba María Priego De La Cruz Olga Fullana David Toscano David Toscano

subject

Executive compensation Financial economics Cash media_common.quotation_subject Systematic risk Equity (finance)Stock market Business Proxy (statistics)Risk taking Deep dive media_common

description

This paper examines the relationship between CEO compensation policies and financial performance in the European hotel sector. We analyze CEO cash-, equity- and total-compensation relationships with two accounting-based and two market-based financial performance proxies, including a bi-dimensional proxy formed by stock market return and risk. This bi-dimensional market-based financial performance proxy enables us to take a deep dive into the relationship between CEO compensation policies and firm risk-taking. We then analyze the nature of this relationship by decomposing market-based risk into systematic and idiosyncratic risk, using five alternative asset-pricing factorial models. Our results support a negative and significant relationship between CEO compensation policies and risk-taking by hotel firms. Moreover, we present evidence that relates this result directly with the idiosyncratic risk assumed by these European companies.

year	journal	country	edition	language
2020-01-01	SSRN Electronic Journal

https://doi.org/10.2139/ssrn.3743575

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