How are Bankers Paid?

38 Pages Posted: 20 Jun 2019 Last revised: 17 Feb 2021

See all articles by Benjamin Bennett

Benjamin Bennett

Tulane University - A.B. Freeman School of Business

Radhakrishnan Gopalan

Washington University in St. Louis - John M. Olin Business School

Anjan V. Thakor

Washington University, Saint Louis - John M. Olin School of Business; European Corporate Governance Institute (ECGI)

Date Written: February 17, 2020

Abstract

We empirically examine bank CEOs’ compensation. We find that bank CEOs (a) are paid less than their nonfinancial counterparts, an effect driven by the CEOs of small bank; (b) experienced declining compensation during 2007–2009 (the hardest-hit banks cut compensation more) but pay is now 24% higher than precrisis levels; (c) are paid more at larger banks, those with less nonperforming loans, those with a higher proportion of noninterest income, and those with less demand-deposit dependence; and (d) have pay highly sensitive to ROA and ROE, but not stock returns. Tail risk is higher when compensation depends more on short-term measures of performance. (JEL F34, G32, G33, G38, K42)

Keywords: Executive compensation, corporate governance, finance industry, TARP

JEL Classification: F34, G32, G33, G38, K42

Suggested Citation

Bennett, Benjamin and Gopalan, Radhakrishnan and Thakor, Anjan V., How are Bankers Paid? (February 17, 2020). European Corporate Governance Institute – Finance Working Paper No. 660/2020, forthcoming, Review of Corporate Finance Studies, Available at SSRN: https://ssrn.com/abstract=3404384 or http://dx.doi.org/10.2139/ssrn.3404384

Benjamin Bennett

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

HOME PAGE: https://sites.google.com/site/benjaminbennettfinance/home

Radhakrishnan Gopalan

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Anjan V. Thakor (Contact Author)

Washington University, Saint Louis - John M. Olin School of Business ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

European Corporate Governance Institute (ECGI) ( email )

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

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