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

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

doi:10.1016/j.ribaf.2017.07.089

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

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

Research output: Contribution to journal › Article › peer-review

19 Citations (Scopus)

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.

Original language	English
Pages (from-to)	1489-1503
Number of pages	15
Journal	Research in International Business and Finance
Volume	42
Early online date	8 Jul 2017
DOIs	https://doi.org/10.1016/j.ribaf.2017.07.089
Publication status	Published - 1 Dec 2017
Externally published	Yes

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth
SDG 16 Peace, Justice and Strong Institutions

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Cite this

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title = "CEO compensation and banks{\textquoteright} risk-taking during pre and post financial crisis periods",

abstract = "This study examines the impact of CEO compensation on banks{\textquoteright} risk during both pre and post-financial crisis periods. Our results suggest a negative relationship between CEO bonuses and banks{\textquoteright} 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{\textquoteright} risk. In contrast, we observe a positive influence of the Troubled Asset Relief Program (TARP) on banks{\textquoteright} risk. Our results also show that the length of time to maturity of options influences banks{\textquoteright} risk-taking behavior. Our findings have useful implications for formulating and regulating CEO compensation structure.",

keywords = "Compensation, Financial crisis, Risk-taking, TARP",

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T1 - CEO compensation and banks’ risk-taking during pre and post financial crisis periods

AU - Shah, Syed Zulfiqar Ali

AU - Akbar, Saeed

AU - Liu, Jia

AU - Liu, Ziyu

AU - Cao, Sichen

PY - 2017/12/1

Y1 - 2017/12/1

N2 - 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.

AB - 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.

KW - Compensation

KW - Financial crisis

KW - Risk-taking

KW - TARP

UR - https://www.scopus.com/pages/publications/85025158314

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DO - 10.1016/j.ribaf.2017.07.089

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SP - 1489

EP - 1503

JO - Research in International Business and Finance

JF - Research in International Business and Finance

ER -

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

Abstract

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