Deferred cash compensation and risk-taking: Evidence from the Chinese banking industry

Wei Jiang, Yunguo Liu, Gerald J. Lobo and Yue Xu

Pacific-Basin Finance Journal, 2019, vol. 53, issue C, 432-448

Abstract: Starting in 2010, the China Banking Regulatory Commission (CBRC) mandated that between 40% and 50% of the annual variable compensation of senior commercial bank managers be paid over the subsequent 3 years or longer. We examine the implications of the CBRC deferred compensation regulation for bank risk-taking using a sample of 156 bank executives from 14 listed Chinese commercial banks. We find that before the 2010 regulation, high-risk banks deferred executive compensation less than low-risk banks. We also find that banks reduced their risk-taking after the 2010 regulation, and the reduction was greater for banks with higher pre-regulation risk. Unlike prior research which examines equity compensation, we provide evidence on the use of deferred executive cash compensation and its implications for bank risk-taking in an emerging market.

Keywords: Deferred executive compensation; Bank risk-taking; Compensation regulation; Multi-period agency (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 G38 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:53:y:2019:i:c:p:432-448

DOI: 10.1016/j.pacfin.2018.12.005

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