Risk-taking Incentives, Governance,and Losses in the Financial Crisis

Marc Chesney, Jacob Stromberg and Alexander Wagner
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Marc Chesney: University of Zurich and Swiss Finance Institute
Jacob Stromberg: University of Zurich (SFI Ph.D. program)

No 10-18, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This paper studies the extent to which risk-taking incentives of CEOs and other governance features in a range of years prior to the recent financial crisis were related to the write-downs of U.S. financial institutions during the crisis. We document that institutions whose CEOs had particularly strong risk-taking incentives, weak ownership incentives and independent boards had the highest write-downs, both in absolute terms and relative to total assets. Furthermore, financial institutions with lower Tier-1 ratios and those with CEOs who earned less than their colleagues at comparable firms had larger write-downs.

Keywords: Executive compensation; Subprime crisis; Write-downs; Corporate governance; Managerial incentives; Risk-taking; Too big to fail (search for similar items in EconPapers)
JEL-codes: G01 G28 G34 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2010-05, Revised 2010-07
New Economics Papers: this item is included in nep-ban and nep-bec
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1018

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