Bank CEO Pay-Performance Relations and the Effects of Deregulation

Anthony J Crawford, John R Ezzell and James A Miles

The Journal of Business, 1995, vol. 68, issue 2, 231-56

Abstract: The authors test the deregulation hypothesis that posits that bank CEO compensation became more sensitive to performance as bank management became less regulated. They observe a significant increase in pay-performance sensitivities from their 1976-81 regulation subsample to their 1982-88 deregulation subsample. These increases in pay sensitivities after deregulation are observed for salary and bonus, stock options, and common stock holdings. The authors observe increases in the pay-performance relation associated with high-capitalization-ratio banks, consistent with providing incentives for wealth creation while even larger increases in pay-performance sensitivity for lower capitalization-ratio banks suggest an Federal Deposit Insurance Corporation moral hazard problem. Copyright 1995 by University of Chicago Press.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:68:y:1995:i:2:p:231-56

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