Executive Compensation and Business Policy Choices at U.S. Commercial Banks
University of Kansas School of Business
Emma Y. Peng
Fordham University - Accounting Area
Fordham University Schools of Business
October 1, 2010
This study examines whether and how the terms of CEO compensation contracts at large commercial banks between 1994 and 2006 influenced, or were influenced by, the risky business policy decisions made by these firms. We find strong evidence that bank CEOs responded to contractual risktaking incentives by taking more risk; systematic evidence that bank boards altered CEO compensation to encourage executives to exploit new growth opportunities; and more limited evidence that bank boards set CEO incentives in a manner designed to moderate excessive risk-taking. These relationships are strongest during the second half of our sample, after deregulation and technological change had expanded banks’ capacities for risk-taking, and for the largest banking companies, which are better strategically positioned to exploit these opportunities.
Number of Pages in PDF File: 55
Keywords: executive compensation, risk taking, commercial banksworking papers series
Date posted: January 31, 2010 ; Last revised: March 12, 2013
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