Bankers on the Board and CEO Incentives
Min Jung Kang and
Andy (Y. Han) Kim
European Financial Management, 2017, vol. 23, issue 2, 292-324
The Sarbanesâ€ Oxley Act demanded the presence of more financial experts on corporate boards to improve governance. Directors from lending banks require particular attention because of the conflicts of interest between shareholders and debtholders despite their financial expertise. In this paper, we examine whether commercial banker directors work in the best interests of shareholders in providing incentives to the CEO. We find that the CEO's compensation VEGA is lower if an affiliated banker director is on the board. Further, we find that commercial banker directors increase debtâ€ like compensation (Sundaram and Yermack, 2007) and make it less sensitive to risk.
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Persistent link: https://EconPapers.repec.org/RePEc:bla:eufman:v:23:y:2017:i:2:p:292-324
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