Relation between Executive Compensation and Performance: Evidence from Japanese Shinkin Banks

Hideaki Sakawa, Naoki Watanabel and Noriko Tanahashi ()
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Noriko Tanahashi: Faculty of Business Administration, Tohoku Gakuin University

Economics Bulletin, 2017, vol. 37, issue 2, 1310-1317

Abstract: This paper presents new insights on the executive incentive structure of the Japanese banking industry. Using data of Shinkin banks over 2003–2006, we investigate the incentive structure of executives at Shinkin banks post financial deregulation when they face competition with other banks in their region and need to earn higher profits. Our empirical results reveal that executive compensation packages at Shinkin banks are designed to provide positive incentives for executives to increase their banks' higher ordinary profit and higher than their belonging region's average profit. This finding implies that executive compensation at Shinkin banks can incentivize executives to make their banks compete more effectively with other Shinkin banks in their region.

Keywords: Agency Problems; Executive Compensation; Shinkin Banks; Japan (search for similar items in EconPapers)
JEL-codes: G2 J3 (search for similar items in EconPapers)
Date: 2017-06-05
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