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Is stricter regulation of incentive compensation the missing piece?

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  • Larry D. Wall

    (Federal Reserve Bank of Atlanta)

Abstract

Although a number of steps have been taken to reduce the risk of financial stability, some significant weaknesses remain. This paper examines whether stricter regulation of incentive compensation is the missing piece needed to reduce risk to acceptable levels. Unfortunately, this survey of studies on the relationship of risk to bank CEO and bank employee compensation suggests both have some potential but that significant concerns remain in both cases. At this point, we cannot confidently say that compensation regulation is the missing piece.

Suggested Citation

  • Larry D. Wall, 2020. "Is stricter regulation of incentive compensation the missing piece?," Journal of Banking Regulation, Palgrave Macmillan, vol. 21(1), pages 82-94, March.
    • Handle: RePEc:pal:jbkreg:v:21:y:2020:i:1:d:10.1057_s41261-019-00119-8
    DOI: 10.1057/s41261-019-00119-8
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    Cited by:

    1. Hilscher, Jens & Landskroner, Yoram & Raviv, Alon, 2021. "Optimal regulation, executive compensation and risk taking by financial institutions," Journal of Corporate Finance, Elsevier, vol. 71(C).

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    More about this item

    Keywords

    Incentive compensation; Bank regulation; Financial stability;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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