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Is Stricter Regulation of Incentive Compensation the Missing Piece?

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  • Larry D. Wall

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 review of the literatures on the relationship of risk to bank chief operating officer and bank employee compensation suggest 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, 2019. "Is Stricter Regulation of Incentive Compensation the Missing Piece?," FRB Atlanta Working Paper 2019-6, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:2019-06
    DOI: 10.29338/wp2019-06
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    References listed on IDEAS

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    2. repec:aei:rpaper:39230 is not listed on IDEAS
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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;

    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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