Misaligned Bank Executive Incentive Compensation

72 Pages Posted: 13 Jun 2013

See all articles by Sanjai Bhagat

Sanjai Bhagat

University of Colorado at Boulder - Department of Finance

Brian J. Bolton

Global Board Center

Date Written: June 11, 2013

Abstract

We study the executive compensation structure in 14 of the largest U.S. financial institutions during 2000-2008. We focus on the CEO’s purchases and sales of their bank’s stock, their salary and bonus, and the capital losses these CEOs incur due to the dramatic share price declines in 2008. We consider three measures of risk-taking by these banks. Our results are mostly consistent with and supportive of the findings of Bebchuk, Cohen and Spamann (2010), that is, managerial incentives matter - incentives generated by executive compensation programs led to excessive risk-taking by banks.

Keywords: corporate governance, executive compensation, insider trading, banks financial crisis

JEL Classification: G32, G21

Suggested Citation

Bhagat, Sanjai and Bolton, Brian J., Misaligned Bank Executive Incentive Compensation (June 11, 2013). Available at SSRN: https://ssrn.com/abstract=2277917 or http://dx.doi.org/10.2139/ssrn.2277917

Sanjai Bhagat (Contact Author)

University of Colorado at Boulder - Department of Finance ( email )

Campus Box 419
Boulder, CO 80309
United States
303-492-7821 (Phone)

Brian J. Bolton

Global Board Center ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland
+41216180225 (Phone)

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