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A unified analysis of executive pay: the case of the banking industry

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Author Info
Gregory E. Sierra
Eli Talmor
James S. Wallace
Abstract

This study examines executive compensation determinants in the U.S. banking industry. Multiple theories of executive pay are discussed and tested using a relatively homogenous sample. We perform an in-depth look at the corporate governance and ownership structure of the companies selected. We explore the simultaneous relationship between compensation, firm performance, and board strength, exploiting variables unique to the banking industry. Our primary finding is that after controlling for both regulatory oversight and external market discipline, a strong board is associated with higher firm performance and lower levels of executive pay, consistent with such a board of directors providing a strong monitoring function.

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Paper provided by Federal Reserve Bank of St. Louis in its series Supervisory Policy Analysis Working Papers with number 2004-02.

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Date of creation: 2004
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Handle: RePEc:fip:fedlsp:2004-02

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Keywords: Executives - Salaries;

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    Other versions:
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  20. John, Kose & Saunders, Anthony & Senbet, Lemma W, 2000. "A Theory of Bank Regulation and Management Compensation," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 13(1), pages 95-125.
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