Managerial Compensation and the Market Reaction to Bank Loans

43 Pages Posted: 29 Jan 2001

See all articles by Andres Almazan

Andres Almazan

University of Texas at Austin - Department of Finance

Javier Suarez

Centre for Monetary and Financial Studies (CEMFI); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2000

Abstract

This Paper considers why a manager would choose to submit himself to the discipline of bank monitoring. This issue is analysed within the context of a model where the manager enjoys private benefits, which can be restricted by the monitor, and is optimally compensated by shareholders. Within this setting, we find that managers will submit to monitoring when they receive favourable private information. This result is consistent with event study evidence that suggests that the market has a favourable view of financing choices that increase monitoring.

Keywords: Banks, managerial compensation, monitoring, optimal contracts

JEL Classification: G32, G34

Suggested Citation

Almazan, Andres and Suarez, Javier, Managerial Compensation and the Market Reaction to Bank Loans (December 2000). Available at SSRN: https://ssrn.com/abstract=258075

Andres Almazan (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-4368 (Phone)
512-471-5073 (Fax)

HOME PAGE: http://www.mccombs.utexas.edu/dept/finance/faculty/profiles/index.asp?addTarget=4

Javier Suarez

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain
+34 91 429 0551 (Phone)
+34 91 429 1056 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
15
Abstract Views
1,269
PlumX Metrics