Abstract

http://ssrn.com/abstract=1695490
 
 

References (36)



 
 

Citations (2)



 


 



The 2007-2009 Financial Crisis and Executive Compensation: An Analysis and a Proposal for a Novel Structure


Alon Raviv


Brandeis University - International Business School

Yoram Landskroner


Hebrew University of Jerusalem - Department of Finance and Banking; New York University (NYU) - Leonard N. Stern School of Business

May 24, 2010

Paris December 2010 Finance Meeting EUROFIDAI - AFFI

Abstract:     
During the 2007-2009 crises financial institutions have come under increasing pressure from regulators, politicians and shareholders to change their compensation practices in order to remove the incentive for short-term excessive risk taking In this paper we analyze how commonly used executive compensation plans can lead to two socially undesirable outcomes: excessive risk taking at one extreme and complete freeze of risky activities (new lending) on the other. We propose adding a new component to the executive compensation, which is paid only if the value of the firm will be located in some predetermined range. These components will push the executive towards the first best solution in which a moderate (internal solution) level of assets risk will be optimal because of the convex relationship between assets risk and compensation value.

Number of Pages in PDF File: 32

Keywords: compensation practices, executive compensation, risk taking, regulation, executive stock options, financial crisis

JEL Classification: G12, G13, G21, G28, G38, E58

working papers series





Download This Paper

Date posted: October 22, 2010  

Suggested Citation

Raviv, Alon and Landskroner, Yoram, The 2007-2009 Financial Crisis and Executive Compensation: An Analysis and a Proposal for a Novel Structure (May 24, 2010). Paris December 2010 Finance Meeting EUROFIDAI - AFFI. Available at SSRN: http://ssrn.com/abstract=1695490 or http://dx.doi.org/10.2139/ssrn.1695490

Contact Information

Alon Raviv (Contact Author)
Brandeis University - International Business School ( email )
Mailstop 32
Waltham, MA 02454-9110
United States
Yoram Landskroner
Hebrew University of Jerusalem - Department of Finance and Banking ( email )
Mount Scopus
Jerusalem, 91905
Israel
New York University (NYU) - Leonard N. Stern School of Business ( email )
44 West 4th Street
New York, NY NY 10012
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,840
Downloads: 469
Download Rank: 3,476
References:  36
Citations:  2

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.266 seconds