Incentive features in CEO compensation in the banking industry
AbstractThis 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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Bibliographic InfoArticle provided by Federal Reserve Bank of New York in its journal Economic Policy Review.
Volume (Year): (2003)
Issue (Month): Apr ()
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- Flannery, Mark J. & Kwan, Simon H. & Nimalendran, M., 2004.
"Market evidence on the opaqueness of banking firms' assets,"
Journal of Financial Economics,
Elsevier, vol. 71(3), pages 419-460, March.
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