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CEO Compensation and real estate prices: pay for luck or pay for action?
| File | Description | Size | Format | |
|---|---|---|---|---|
 s11142-022-09700-5.pdf | Published version | 646.83 kB | Adobe PDF | View/Open |
| Title: | CEO Compensation and real estate prices: pay for luck or pay for action? |
| Authors: | Custodio, C Albuquerque, A Cvijanovic, D Bennett, B |
| Item Type: | Journal Article |
| Abstract: | This paper uses variation in real estate prices to study Chief Executive Officer (CEO) pay for luck. We distinguish between pay for luck and pay for responding to luck (action) by exploiting US GAAP accounting rules, which mandate that real estate used in the firm’s operations is not marked-to-market. This setting allows us to empirically disentangle pay for luck from pay for action, as a change in the value of real estate is only accounted for when the CEO responds to changes in property value. We show that CEO compensation is associated with the following two managerial responses to changes in real estate values: (i) real estate sales and (ii) debt issuance. Overall, we show that CEOs are rewarded for taking value-enhancing actions in response to luck. |
| Issue Date: | 1-Dec-2023 |
| Date of Acceptance: | 3-Jan-2022 |
| URI: | http://hdl.handle.net/10044/1/93995 |
| DOI: | 10.1007/s11142-022-09700-5 |
| ISSN: | 1380-6653 |
| Publisher: | Springer |
| Start Page: | 2401 |
| End Page: | 2447 |
| Journal / Book Title: | Review of Accounting Studies |
| Volume: | 28 |
| Copyright Statement: | © The Author(s) 2022. Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/. |
| Publication Status: | Published |
| Online Publication Date: | 2022-08-23 |
| Appears in Collections: | Imperial College Business School |
This item is licensed under a Creative Commons License
