CEO incentives and bank risk
AbstractWe investigate the relationship between CEO compensation and bank default risk predictors to determine if short-term incentives can explain recent excesses in bank risk. We investigate early warning off-site surveillance parameters and expected default frequency (EDF) as well as crisis-related risky bank activities. We find only modest evidence that CEO compensation structures promote significant firm-specific heterogeneity in bank risk measures or risky activities. Compensation elements commonly thought to be the riskiest components, unvested options and bonuses, are either insignificant or negatively correlated with common risk variables, and only positively significant in predicting the level of trading assets and securitization income.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economics and Business.
Volume (Year): 63 (2011)
Issue (Month): 5 (September)
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Web page: http://www.elsevier.com/locate/jeconbus
CEO compensation Bank risk Bank regulation Bank failure Bank EDF;
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Freddie and the Crisis
by Jonathan Finegold in Economic Thought on 2012-11-13 13:00:33
- The Price of Inequality: the Good, the Bad, and the Ugly
by Jonathan Finegold in Economic Thought on 2012-12-22 16:00:07
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