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- Title
How Can We Pay to Get Out of This? Executive Compensation and Bank Risk during the Financial Crisis.
- Authors
White, Reilly S.; Hollingsworth, Kathy G.
- Abstract
Using a database of 164 publicly traded banking firms, we examine the link between executive compensation and bank risk from 2006-2013. We find that higher salaries in banking executives improve Tier 1 capital ratios, while higher equity and pension compensation reduce Tier 1 capital. Dividing our sample into risk quintiles, we find that low-risk banks respond the most to salary incentives and high-risk banks to equity incentives. Surprisingly, lower pension values were associated with higher Tier 1 capital ratios across all quintiles. Our paper is the first to examine the role of both CEO and non-CEO compensation ratios in determining Tier 1 capital during the financial crisis.
- Subjects
EXECUTIVE compensation; FINANCIAL crises; BANKING industry personnel; PENSIONS; CORPORATE governance
- Publication
Banking & Finance Review, 2018, Vol 10, Issue 1, p19
- ISSN
1947-7945
- Publication type
Article