Risk-taking Incentives, Governance,and Losses in the Financial Crisis
This paper studies the extent to which risk-taking incentives of CEOs and other governance features in a range of years prior to the recent financial crisis were related to the write-downs of U.S. financial institutions during the crisis. We document that institutions whose CEOs had particularly strong risk-taking incentives, weak ownership incentives and independent boards had the highest write-downs, both in absolute terms and relative to total assets. Furthermore, financial institutions with lower Tier-1 ratios and those with CEOs who earned less than their colleagues at comparable firms had larger write-downs.
|Date of creation:||May 2010|
|Date of revision:||Nov 2010|
|Contact details of provider:|| Web page: http://www.SwissFinanceInstitute.ch|
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