EconPapers    
Economics at your fingertips  
 

Deregulation and the relationship between bank CEO compensation and risk taking

Elijah Brewer, William C. Hunter and William E. Jackson

No WP-03-32, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: The deregulation of the banking industry during the 1990s provides a natural (public policy) experiment for investigating how firms adjust their executive compensation contracts as the environment in which they operate becomes relatively more competitive. Using the Riegle-Neal Act of 1994 as a focal point, we investigate how banks changed the equity-based component of bank CEO compensation contracts. We also examine the relationships between equity- based compensation and risk, capital structure, and investment opportunity set. Consistent with theoretical predictions, we find that after deregulation, the equity- based component of bank CEO compensation increases significantly on average for the industry. Additionally, we find that more risky banks have significantly higher levels of equity-based compensation, as do banks with more investment opportunities. But, more levered banks do not have higher levels of equity-based CEO compensation. Finally, we observe that most of these relationships become more powerful in our post- deregulation period.

Keywords: Corporate governance; Bank supervision (search for similar items in EconPapers)
Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.chicagofed.org/digital_assets/publicati ... s/2003/wp2003-32.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedhwp:wp-03-32

Ordering information: This working paper can be ordered from
http://www.chicagofe ... ation_order_form.cfm

Access Statistics for this paper

More papers in Working Paper Series from Federal Reserve Bank of Chicago Contact information at EDIRC.
Bibliographic data for series maintained by Bernie Flores ().

 
Page updated 2019-12-13
Handle: RePEc:fip:fedhwp:wp-03-32