Asymmetric sensitivity of CEO cash compensation to stock returns

Andrew J. Leone, Joanna Shuang Wu, Jerold L. Zimmerman

Research output: Contribution to journalArticlepeer-review

129 Scopus citations


We document that CEO cash compensation is twice as sensitive to negative stock returns as it is to positive stock returns. Since stock returns include both unrealized gains and unrealized losses, we expect cash compensation to be less sensitive to stock returns when returns contain unrealized gains (positive returns) than when returns contain unrealized losses (negative returns). This is consistent with boards of directors exercising discretion to reduce costly ex post settling up in cash compensation paid to CEOs.

Original languageEnglish (US)
Pages (from-to)167-192
Number of pages26
JournalJournal of Accounting and Economics
Issue number1-2
StatePublished - Oct 1 2006


  • Contracting
  • Ex post settling up
  • Management compensation
  • Pay-performance sensitivity

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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