Bank Return Volatility and Management Structure

Xiaolou Yang and Gang Peng

Journal of Applied Finance & Banking, 2014, vol. 4, issue 6, 10

Abstract: This study investigates the dynamic relationship between bank management structure, payment contract and bank return volatility. We find that increasing the sensitivity of executives pay to equity risk will increase bank return volatility. When CEOs are also the chairs of board directors, bank risk is higher. As banks expand more risky investments, the risk level of the banks is higher. These results hold not only for commercial banks but also for savings and loan institutions.

Date: 2014
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