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<p>This study examines how tenant concentration risk influences CEO compensation design in listed equity Real Estate Investment Trusts (REITs). We find that boards of REITs with concentrated tenant bases structure CEO pay packages to offset managerial risk aversion. The relation between tenant concentration and risk-taking incentives awarded to CEOs remains robust to tests addressing reverse causality and endogeneity. The association is stronger when tenants are smaller and less profitable, and weaker when REITs have poor growth opportunities. We also find that higher CEO Vega is followed by greater systematic risk, leverage and portfolios concentration. Overall, the results suggest that REIT boards tailor CEO incentives to tenant-specific operational risk rather than generic market risk alone.</p>

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More Risk, More Reward: The Role of Tenant Concentration in Shaping Equity-Based Compensation

  • 期刊论文

  • 发表日期：

    2026年7月16日

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  • Ryan G. Chacon,
  • Zifeng Feng,
  • Pratik Kothari,
  • Joseph T.L. Ooi

摘要

This study examines how tenant concentration risk influences CEO compensation design in listed equity Real Estate Investment Trusts (REITs). We find that boards of REITs with concentrated tenant bases structure CEO pay packages to offset managerial risk aversion. The relation between tenant concentration and risk-taking incentives awarded to CEOs remains robust to tests addressing reverse causality and endogeneity. The association is stronger when tenants are smaller and less profitable, and weaker when REITs have poor growth opportunities. We also find that higher CEO Vega is followed by greater systematic risk, leverage and portfolios concentration. Overall, the results suggest that REIT boards tailor CEO incentives to tenant-specific operational risk rather than generic market risk alone.