Bank executive pay limits and discretionary loan loss provisions: Evidence from China

Xiaohui Hou, Bo Wang, Jiale Lian and Wanli Li

Research in International Business and Finance, 2021, vol. 58, issue C

Abstract: This paper investigates the impact of bank executive pay limits on discretionary loan loss provisions (DLLPs) in the context of a large emerging economy, such as that of China. We find that a bank executive pay limit primarily aimed at temporarily suspending stock option incentive plans leads to a significant rise in income-decreasing DLLPs, whereas a pay limit implemented to restrict the total emoluments leads to a significant decline in income-increasing DLLPs. Moreover, the degree of the impact of pay limits on bank DLLPs varies with CEOs’ personal characteristics and bank executive perquisites.

Keywords: Executive pay limit; Loan loss provisions; Commercial banks; China (search for similar items in EconPapers)
JEL-codes: G21 G28 M40 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:58:y:2021:i:c:s0275531921000489

DOI: 10.1016/j.ribaf.2021.101427

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