Misaligned Bank Executive Incentive Compensation
72 Pages Posted: 13 Jun 2013
Date Written: June 11, 2013
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: Suggested Citation