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CEO compensation and banks’ risk-taking during pre and post financial crisis periods

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  • Shah, Syed Zulfiqar Ali
  • Akbar, Saeed
  • Liu, Jia
  • Liu, Ziyu
  • Cao, Sichen

Abstract

This study examines the impact of CEO compensation on banks’ risk during both pre and post-financial crisis periods. Our results suggest a negative relationship between CEO bonuses and banks’ risk in the pre-financial crisis period. Similarly, restricted shares and options granted to CEOs in the post-financial crisis period also appear to decrease banks’ risk. In contrast, we observe a positive influence of the Troubled Asset Relief Program (TARP) on banks’ risk. Our results also show that the length of time to maturity of options influences banks’ risk-taking behavior. Our findings have useful implications for formulating and regulating CEO compensation structure.

Suggested Citation

  • Shah, Syed Zulfiqar Ali & Akbar, Saeed & Liu, Jia & Liu, Ziyu & Cao, Sichen, 2017. "CEO compensation and banks’ risk-taking during pre and post financial crisis periods," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1489-1503.
  • Handle: RePEc:eee:riibaf:v:42:y:2017:i:c:p:1489-1503
    DOI: 10.1016/j.ribaf.2017.07.089
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