Executive Compensation and Business Policy Choices at U.S. Commercial Banks

DeYoung, Robert; Peng, Emma Y.; Yan, Meng

View/Open

Executive Compensation and Business Policy Choices at U.S. Commercial Banks.pdf (1.014Mb)

Issue Date

2010-01

Author

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.pdf

Metadata

Show full item record

Abstract

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.

URI

http://hdl.handle.net/1808/10085

Collections

School of Business Scholarly Works [184]
Distinguished Professors Scholarly Works [919]

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,

The University of Kansas prohibits discrimination on the basis of race, color, ethnicity, religion, sex, national origin, age, ancestry, disability, status as a veteran, sexual orientation, marital status, parental status, gender identity, gender expression and genetic information in the University’s programs and activities. The following person has been designated to handle inquiries regarding the non-discrimination policies: Director of the Office of Institutional Opportunity and Access, IOA@ku.edu, 1246 W. Campus Road, Room 153A, Lawrence, KS, 66045, (785)864-6414, 711 TTY.