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CEO compensation and banks’ risk-taking during pre and post financial crisis periods

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  • Shah, Syed Zulfiqar Ali
  • Akbar, Saeed
  • Liu, Jia
  • Liu, Ziyu
  • Cao, Sichen

Abstract

This study examines the impact of CEO compensation on banks’ risk during both pre and post-financial crisis periods. Our results suggest a negative relationship between CEO bonuses and banks’ risk in the pre-financial crisis period. Similarly, restricted shares and options granted to CEOs in the post-financial crisis period also appear to decrease banks’ risk. In contrast, we observe a positive influence of the Troubled Asset Relief Program (TARP) on banks’ risk. Our results also show that the length of time to maturity of options influences banks’ risk-taking behavior. Our findings have useful implications for formulating and regulating CEO compensation structure.

Suggested Citation

  • Shah, Syed Zulfiqar Ali & Akbar, Saeed & Liu, Jia & Liu, Ziyu & Cao, Sichen, 2017. "CEO compensation and banks’ risk-taking during pre and post financial crisis periods," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1489-1503.
    • Handle: RePEc:eee:riibaf:v:42:y:2017:i:c:p:1489-1503
    DOI: 10.1016/j.ribaf.2017.07.089
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    2. Huang, qhuang, 2020. "Executive compensation and risk-taking of Chinese banks," MPRA Paper 100377, University Library of Munich, Germany, revised 18 Apr 2020.
    3. Mouna Aloui & Bassem Salhi & Anis Jarboui, 2019. "Market risk, corporate governance, and the regulation during the recent financial crisis," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 15(5), pages 700-718, May.
    4. Gu, Junjian, 2022. "Do at home as Romans do? CEO overseas experience and financial misconduct risk of emerging market firms," Research in International Business and Finance, Elsevier, vol. 60(C).
    5. Qiubin Huang, 2023. "Executive compensation and bank risk in China," Economics and Business Letters, Oviedo University Press, vol. 12(1), pages 62-67.
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    7. Ooi, Chai-Aun & Setiawan, Doddy & Hooy, Chee-Wooi, 2021. "Muslim CEOs and bank risk-taking: Evidence from Indonesia," Global Finance Journal, Elsevier, vol. 50(C).

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