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Incentive features in CEO compensation in the banking industry

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Author Info
Kose John
Yiming Qian

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Abstract

This article examines the incentive features of top-management compensation in the banking industry. Economic theory suggests that the compensation structures for bank management should have low pay-performance sensitivity because of the high leverage of banks and the fact that banks are regulated institutions. In accordance with this school of thought, the authors find that the pay-performance sensitivity for bank CEOs is lower than it is for CEOs of manufacturing firms. This difference is attributable largely to the difference in debt ratios. The authors also find that banks' pay-performance sensitivity declines with bank size.

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Publisher Info
Article provided by Federal Reserve Bank of New York in its journal Economic Policy Review.

Volume (Year): (2003)
Issue (Month): Apr ()
Pages: 109-121
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Handle: RePEc:fip:fednep:y:2003:i:apr:p:109-121:n:v.9no.1

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Related research
Keywords: Bank management ; Executives - Salaries ; Bank supervision ; Corporate governance;

References listed on IDEAS
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  1. Andrei Shleifer & Robert W. Vishny, 1995. "A Survey of Corporate Governance," Harvard Institute of Economic Research Working Papers 1741, Harvard - Institute of Economic Research.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Panagiotis Staikouras & Christos Staikouras & Maria-Eleni Agoraki, 2007. "The effect of board size and composition on European bank performance," European Journal of Law and Economics, Springer, vol. 23(1), pages 1-27, February. [Downloadable!] (restricted)
  2. Wim Fonteyne, 2007. "Cooperative Banks in Europe--Policy Issues," IMF Working Papers 07/159, International Monetary Fund. [Downloadable!]
  3. Georges Dionne, 2003. "The Foundationsof Banks' Risk Regulation: A Review of Literature," THEMA Working Papers 2003-46, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
  4. Kose John & Hamid Mehran & Yiming Qian, 2007. "Regulation, subordinated debt, and incentive features of CEO compensation in the banking industry," Staff Reports 308, Federal Reserve Bank of New York. [Downloadable!]
  5. Elizabeth Webb, 2008. "Regulator Scrutiny and Bank CEO Incentives," Journal of Financial Services Research, Springer, vol. 33(1), pages 5-20, February. [Downloadable!] (restricted)
  6. Valentina Hartarska, 2004. "Governance and Performance of Microfinance Institutions in Central And Eastern Europe and the Newly Independent States," William Davidson Institute Working Papers Series 2004-677, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  7. Agoraki, Maria-Eleni & Delis, Manthos D & Staikouras, Panagiotis, 2009. "The effect of board size and composition on bank efficiency," MPRA Paper 18548, University Library of Munich, Germany. [Downloadable!]
  8. Hamid Mehran & Joshua Rosenberg, 2007. "The effect of employee stock options on bank investment choice, borrowing, and capital," Staff Reports 305, Federal Reserve Bank of New York. [Downloadable!]
  9. Hartarska, Valentina, 2005. "Governance and Performance of Microfinance Institutions in Central and Eastern Europe and the Newly Independent States," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24568, European Association of Agricultural Economists. [Downloadable!]
  10. Levine, Ross, 2004. "The Corporate Governance of Banks - a concise discussion of concepts and evidence," Policy Research Working Paper Series 3404, The World Bank. [Downloadable!]
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