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...

Inside debt compensation held by top officers of U.S. banks is negatively related to risk and risk-taking. The evidence reveals a robust and strongly negative relation between end-of-2006 inside debt and 2007-2009 bank-specific risk exposures in terms of lost stock market value, volatility, tail...

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...

Widespread losses during the recent financial crisis have increased concerns that equity-based compensation for bank CEOs causes excessive risk-taking by banks. Debt-based compensation, so-called inside debt, aligns the interests of CEOs with those of external creditors. We examine whether...

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 investigate the link between firm size and risk-taking among financial institutions during the period of 1998-2008 and make three contributions. First, size is positively correlated with risk-taking measures even when controlling for other observable firm characteristics. This is consistent...

Failures of banks' governance and risk management functions have been identified as key causes of the 2007-2008 financial crisis. This article reviews the empirical literature that investigates the relationship between governance structures and risk management functions as well as their impact...

This paper examines whether the systemic risk of financial institutions is associated with the risk-taking incentives generated by executive compensation. We measure managerial risk-taking incentives with the sensitivities of chief executive officer (CEO) and chief financial officer (CFO)...

Does additional shareholder liability reduce bank failure? We compare the performance of around 4,400 state-regulated banks of similar size in neighboring U.S. states with different liability regimes during the Great Depression. We find that additional shareholder liability reduced bank failure...