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Relation between Executive Compensation and Performance: Evidence from Japanese Shinkin Banks

Author

Listed:
  • Hideaki Sakawa

    (Graduate School of Economics, Nagoya City University)

  • Naoki Watanabel

    (Graduate School of Economics, Nagoya City University)

  • Noriko Tanahashi

    (Faculty of Business Administration, Tohoku Gakuin University)

Abstract

This paper presents new insights on the executive incentive structure of the Japanese banking industry. Using data of Shinkin banks over 2003–2006, we investigate the incentive structure of executives at Shinkin banks post financial deregulation when they face competition with other banks in their region and need to earn higher profits. Our empirical results reveal that executive compensation packages at Shinkin banks are designed to provide positive incentives for executives to increase their banks' higher ordinary profit and higher than their belonging region's average profit. This finding implies that executive compensation at Shinkin banks can incentivize executives to make their banks compete more effectively with other Shinkin banks in their region.

Suggested Citation

  • Hideaki Sakawa & Naoki Watanabel & Noriko Tanahashi, 2017. "Relation between Executive Compensation and Performance: Evidence from Japanese Shinkin Banks," Economics Bulletin, AccessEcon, vol. 37(2), pages 1310-1317.
    • Handle: RePEc:ebl:ecbull:eb-16-00470
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Agency Problems; Executive Compensation; Shinkin Banks; Japan;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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