CEO compensation and banks’ risk-taking during pre and post financial crisis periods

Syed Zulfiqar Ali Shah, Saeed Akbar, Jia Liu, Ziyu Liu and Sichen Cao

Research in International Business and Finance, 2017, vol. 42, issue C, 1489-1503

Abstract: This study examines the impact of CEO compensation on banks’ risk during both pre and post-financial crisis periods. Our results suggest a negative relationship between CEO bonuses and banks’ risk in the pre-financial crisis period. Similarly, restricted shares and options granted to CEOs in the post-financial crisis period also appear to decrease banks’ risk. In contrast, we observe a positive influence of the Troubled Asset Relief Program (TARP) on banks’ risk. Our results also show that the length of time to maturity of options influences banks’ risk-taking behavior. Our findings have useful implications for formulating and regulating CEO compensation structure.

Keywords: Compensation; Risk-taking; Financial crisis; TARP (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:42:y:2017:i:c:p:1489-1503

DOI: 10.1016/j.ribaf.2017.07.089

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