Affordable Access

CEO incentives and bank risk

Authors

Abstract

We investigate the relationship between CEO compensation and bank default risk predictors to determine if short-term incentives can explain recent excesses in bank risk. We investigate early warning off-site surveillance parameters and expected default frequency (EDF) as well as crisis-related risky bank activities. We find only modest evidence that CEO compensation structures promote significant firm-specific heterogeneity in bank risk measures or risky activities. Compensation elements commonly thought to be the riskiest components, unvested options and bonuses, are either insignificant or negatively correlated with common risk variables, and only positively significant in predicting the level of trading assets and securitization income.

There are no comments yet on this publication. Be the first to share your thoughts.

Statistics

Seen <100 times
0 Comments

More articles like this

CEO incentives and bank risk

on Journal of Economics and Busin... Jan 01, 2011

CEO pay incentives and risk-taking: Evidence from...

on Journal of Corporate Finance Jan 01, 2011

CEO incentives for risk shifting and its effect on...

on International Review of Financ...
More articles like this..