Using unique hand-collected data on CEO compensation packages retrieved from the largest 59 European banks from 16 Western European countries for the period from 2000 to 2008 this paper provides empirical evidence that both variable cash-based and variable equity-based compensation are...

The large compensation received by bank executives is among the many factors blamed for the risk-taking that led to the 2008-2009 financial crisis. We test whether and how pay disparities between CEO and non-CEO executives—the so-called CEO pay gap—influenced risk taking at publicly traded...

Employing compensation data provided by 63 banks from 16 European countries for the period from 2000 to 2010 this paper empirically investigates the impact of excess variable compensation on bank risk. As a main finding, we provide evidence for a risk-increasing impact of excess variable pay for...

Das internationale Bankensystem stand in den vergangenen Jahren im Fokus des öffentlichen Interesses. Bei der Diskussion möglicher Optionen zur Verbesserung der Finanzsystemstabilität rückt zunehmend die Corporate Governance in Banken in den Fokus. Der vorliegende Forschungsbericht widmet...

This paper analyzes how ownership concentration and managerial incentives influences bank risk for a large sample of US banks over the period 1997-2007. Using 2SLS simultaneous equations models, we show that ownership concentration has a positive total effect on bank risk. This is the result of...

We analyze how the structure of executive compensation affects the risk choices made by bank CEOs. For a sample of acquiring US banks, we employ the Merton distance to default model to show that CEOs with higher pay-risk sensitivity engage in risk-inducing mergers. Our findings are driven by two...

We investigate the link between the incentive mechanisms embedded in CEO cash bonuses and the riskiness of banks. For a sample of U.S. and European banks, we employ the Merton distance to default model to show that increases in CEO cash bonuses lower the default risk of a bank. However, we find...

This paper analyzes the effects of two regulatory mechanisms, namely a regulation of the structure of bank CEOs incentive pay and sanctions for the CEOs of failed banks, on bank risk shifting. We extend a standard model of CEO compensation by incorporating leverage and an investment decision. To...

Recent financial crisis has renewed attention on compensation schemes and their impact on risk-taking in depository institutions. Without ample theoretical and empirical backing, the recent policy proposals in the EU have suggested that long-term incentive plans that are closely linked to bank...