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CEO compensation and bank efficiency: An application of conditional nonparametric frontiers

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  • Matousek, Roman
  • Tzeremes, Nickolaos G.

Abstract

The paper investigates in a dynamic context the effect of Chief Executive Officer (CEO) bonus and salary payments on banks’ technical efficiency levels. Our methodological framework incorporates the latest developments on the probabilistic approach of efficiency measurement as introduced by Bădin et al. (2012). We apply time-dependent conditional efficiency estimates to analyse a sample of 37 US banks for the period from 2003 to 2012. The empirical evidence reveals a non-linear relationship between CEO bonus and salary payments and banks’ efficiency levels. More specifically it is reported that salary and bonus payments affect differently banks’ technological change and technological catch-up levels. Finally, the empirical evidence suggests that higher salary and bonus payments are not always aligned with higher technical efficiency levels.

Suggested Citation

  • Matousek, Roman & Tzeremes, Nickolaos G., 2016. "CEO compensation and bank efficiency: An application of conditional nonparametric frontiers," European Journal of Operational Research, Elsevier, vol. 251(1), pages 264-273.
  • Handle: RePEc:eee:ejores:v:251:y:2016:i:1:p:264-273
    DOI: 10.1016/j.ejor.2015.10.035
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    Cited by:

    1. repec:eee:ejores:v:261:y:2017:i:3:p:1125-1140 is not listed on IDEAS
    2. Degl’Innocenti, Marta & Matousek, Roman & Sevic, Zeljko & Tzeremes, Nickolaos G., 2017. "Bank efficiency and financial centres: Does geographical location matter?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 46(C), pages 188-198.
    3. repec:eee:ecofin:v:43:y:2018:i:c:p:71-86 is not listed on IDEAS
    4. repec:kap:jproda:v:48:y:2017:i:1:d:10.1007_s11123-017-0500-z is not listed on IDEAS
    5. Luiza Badin & Cinzia Daraio & Léopold Simar, 2018. "A Bootstrap Approach for Bandwidth Selection in Estimating Conditional Efficiency Measures," DIAG Technical Reports 2018-02, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    6. repec:pal:jorsoc:v:68:y:2017:i:11:d:10.1057_s41274-017-0180-0 is not listed on IDEAS
    7. repec:eee:ejores:v:265:y:2018:i:2:p:748-764 is not listed on IDEAS
    8. Cinzia Daraio & Leopold Simar & Paul W. Wilson, 2018. "Fast and Efficient Computation of Directional Distance Estimators," LEM Papers Series 2018/21, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    9. Cinzia Daraio & Léopold Simar & Paul W. Wilson, 2018. "Fast and Efficient Computation of Directional Distance Estimators," DIAG Technical Reports 2018-05, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".

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