CEO compensation and banks’ risk-taking during pre and post financial crisis periods

Shah, Syed Zulfiqar Ali; Akbar, Saeed; Liu, Jia; Liu, Ziyu; Cao, Sichen

Abstract

© 2017 Elsevier B.V. This study examines the impact of CEO compensation on banks’ risk during both pre and post-financial crisis periods. Our results suggest a negative relationship between CEO bonuses and banks’ risk in the pre-financial crisis period. Similarly, restricted shares and options granted to CEOs in the post-financial crisis period also appear to decrease banks’ risk. In contrast, we observe a positive influence of the Troubled Asset Relief Program (TARP) on banks’ risk. Our results also show that the length of time to maturity of options influences banks’ risk-taking behavior. Our findings have useful implications for formulating and regulating CEO compensation structure.

Citation

Shah, S. Z. A., Akbar, S., Liu, J., Liu, Z., & Cao, S. (2017). CEO compensation and banks’ risk-taking during pre and post financial crisis periods. Research in international business and finance, 42, 1489-1503. https://doi.org/10.1016/j.ribaf.2017.07.089

• Journal Article Type: Article
• Acceptance Date: Jul 3, 2017
• Online Publication Date: Jul 8, 2017
• Publication Date: 2017-12
• Deposit Date: Sep 18, 2018
• Publicly Available Date: Jan 9, 2019
• Journal: Research in International Business and Finance
• Print ISSN: 0275-5319
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 42
• Pages: 1489-1503
• DOI: https://doi.org/10.1016/j.ribaf.2017.07.089
• Keywords: Compensation; Risk-taking; Financial crisis; TARP
• Public URL: https://hull-repository.worktribe.com/output/519262
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S027553191630513X?via%3Dihub
• Related Public URLs: http://usir.salford.ac.uk/43526/