Basel III and CEO compensation: a new regulation attempt after the crisis
AbstractThe paper analyzes the interaction between an endogenous capital structure and investment decision, and the incentive scheme of bank executives. We show that the implementation of capital requirements, which are contingent on compensation schemes, drive a wedge between the interests of the shareholder and the CEO. This non-alignment can mitigate excessive risk taking. In particular, linking the amount of insured debt to the ratio of fixed and performance based salary encourages first-best outcomes. We derive empirical predictions and policy implications. --
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Bibliographic InfoPaper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century with number 62056.
Date of creation: 2012
Date of revision:
Find related papers by JEL classification:
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-12 (All new papers)
- NEP-BAN-2013-01-12 (Banking)
- NEP-HRM-2013-01-12 (Human Capital & Human Resource Management)
- NEP-RMG-2013-01-12 (Risk Management)
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