Executive Compensation and Business Policy Choices at U.S. Commercial Banks
Issue Date
2010-01Author
DeYoung, Robert
Peng, Emma Y.
Yan, Meng
Publisher
Federal Reserve Bank of Kansas City
Type
Article
Article Version
Scholarly/refereed, publisher version
Published Version
http://www.frbkc.org/PUBLICAT/RESWKPAP/PDF/rwp10-02.pdfMetadata
Show full item recordAbstract
This study examines whether and how the terms of CEO compensation contracts at large
commercial banks between 1994 and 2006 influenced, or were influenced by, the risky business
policy decisions made by these firms. We find strong evidence that bank CEOs responded to
contractual risk-taking incentives by taking more risk; bank boards altered CEO compensation to
encourage executives to exploit new growth opportunities; and bank boards set CEO incentives
in a manner designed to moderate excessive risk-taking. These relationships are strongest during
the second half of our sample, after deregulation and technological change had expanded banks’
capacities for risk-taking.
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Citation
DeYoung, Robert. Peng, Emma Y. Yan, Meng. (2010) "Executive Compensation and Business Policy Choices at U.S. Commercial Banks." Journal of Financial and Quantitative Analysis,
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