Deferred Cash Compensation and Risk Taking: Evidence from the Chinese Banking Industry
34 Pages Posted: 16 Aug 2016 Last revised: 5 Dec 2016
Date Written: August 14, 2016
Using a sample of 172 bank managers from 14 listed Chinese commercial banks during the period 2006-2014, we examine the use of deferred executive compensation and find empirical evidence for the multi-period agency explanation. Specifically, we find before the 2010 regulation which mandated the use of deferred executive compensation, banks with high risk deferred executive compensation less, while banks with low risk deferred executive compensation more. After the 2010 mandatory regulation, banks deferred executive compensation more than before, and the effect of the regulation is stronger in banks with high risk than in banks with low risk. The prior literature on the deferred compensation practice mainly focuses on the developed markets. This study provides some evidence on the use of deferred executive compensation in the emerging markets.
Keywords: Deferred compensation; Dynamic compensation; Regulation; Multi-period agency
JEL Classification: G21; G32; M52
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