Economic Policy Uncertainty and CEO Compensation

Economic policy uncertainty impact firm liquidity and performance and could induce firms to retain and incentivize talented CEOs. This study examines the impact of Economic policy uncertainty (EPU) on CEO compensation. EPU is measured using a weighted index composed of news coverage, taxes, and forecast data related to policy-driven economic uncertainty, whereafter a regression model is applied. The findings indicate that EPU is positively associated with CEO compensation, with an increase in CEO compensation being driven primarily by an increase in cash pay.