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

Shah, SZA; Akbar, S; Liu, JL; Liu, Z; Cao, S

Abstract

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., 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: Dec 1, 2017
• Deposit Date: Aug 14, 2017
• Publicly Available Date: Jan 8, 2019
• Journal: Research in International Business and Finance
• Print ISSN: 0275-5319
• Publisher: Elsevier
• Volume: 42
• Pages: 1489-1503
• DOI: https://doi.org/10.1016/j.ribaf.2017.07.089
• Publisher URL: http://dx.doi.org/10.1016/j.ribaf.2017.07.089
• Related Public URLs: https://www.journals.elsevier.com/research-in-international-business-and-finance