Abstract

http://ssrn.com/abstract=1865870
 
 

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CEO Compensation and Risk-taking at Financial Firms: Evidence from U.S. Federal Loan Assistance


Amar Gande


Southern Methodist University

Swaminathan L. Kalpathy


Texas Christian University - M.J. Neeley School of Business

July 16, 2013


Abstract:     
We examine whether CEO compensation before the 2007 financial crisis led to excessive risk taking in sixty-nine large financial firms. Risk taking is proxied by the extent of U.S. Federal Reserve emergency loans provided to these firms. We find that the amount of emergency loans and total days the loans are outstanding are both increasing in pre-crisis CEO risk-taking incentives. Consistent with the secretive nature of these loan programs, the extent of loan assistance is uncorrelated with crisis period stock returns. Our results somewhat support recent regulatory initiatives on managerial incentive compensation for systemically important financial firms.

Number of Pages in PDF File: 44

Keywords: CEO Compensation, CEO Incentives, Financial Crisis, Financial Deregulation, Federal Emergency Loans

JEL Classification: G01, G21, G32

working papers series


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Date posted: June 24, 2011 ; Last revised: July 17, 2013

Suggested Citation

Gande, Amar and Kalpathy, Swaminathan L., CEO Compensation and Risk-taking at Financial Firms: Evidence from U.S. Federal Loan Assistance (July 16, 2013). Available at SSRN: http://ssrn.com/abstract=1865870 or http://dx.doi.org/10.2139/ssrn.1865870

Contact Information

Amar Gande
Southern Methodist University ( email )
P.O. Box 750333
Dallas, TX 75275-0333
United States
2147681945 (Phone)
2147684099 (Fax)
Swaminathan L. Kalpathy (Contact Author)
Texas Christian University - M.J. Neeley School of Business ( email )
Fort Worth, TX 76129
United States
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