Executive Compensation and Risk-Taking of Chinese Banks

11 Pages Posted: 4 Jun 2020

See all articles by Qiubin Huang

Qiubin Huang

University of Science and Technology Beijing - School of Economics and Management

Date Written: April 18, 2020

Abstract

We document a significantly positive relationship between executive compensation and risk-taking of Chinese listed banks over the 2007–2018 period. The finding is robust to the risk measures (Z-score, systematic risk and stock return volatility) used, the way to calculate executive compensation, and model specifications as well as estimation techniques. Further analysis suggests that bank past performance (captured by return on equity) strongly moderates the relationship between executive compensation and risk-taking. We also find a modest U-shaped association of bank Z-score with executive compensation. Our study appears to support the regulation on executive compensation for the sake of bank stability.

Keywords: Executive compensation; Bank risk; Bank performance; Z-score; Chinese banks

JEL Classification: G21, G28, M12

Suggested Citation

Huang, Qiubin, Executive Compensation and Risk-Taking of Chinese Banks (April 18, 2020). Available at SSRN: https://ssrn.com/abstract=3594987 or http://dx.doi.org/10.2139/ssrn.3594987

Qiubin Huang (Contact Author)

University of Science and Technology Beijing - School of Economics and Management

30 Xueyuan Road, Haidian District
Beijing, 100083
China

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