During the 2007-2009 crises financial institutions have come under increasing pressure from regulators, politicians and shareholders to change their compensation practices in order to remove the incentive for short-term excessive risk taking In this paper we analyze how commonly used executive...

During the 2007-2009 crises financial institutions have come under increasing pressure from regulators, politicians and shareholders to change their compensation practices in order to remove the incentive for short term excessive risk taking. In this paper we analyze how commonly used executive...

We develop a model in which firms in financial distress design executive compensation contracts, hire and fire executives, and accept or reject government bailout funds that (if accepted) constrain the design of future compensation contracts. Using data from COMPUSTAT and ExecuComp (1992-2007)...

In the aftermath of the 2007-2008 financial crisis, flawed variable pay structures of executives were blamed by many for contributing to the build-up of the global financial turmoil, as they allegedly incentivized them to engage in excessive risk-taking. Legislators around the globe decided to...

This paper demonstrates that executive compensation convexity, measured as the sensitivity of managerial equity compensation portfolios to stock volatility, predicts firm-specific crashes. A bottom-to-top decile change in compensation convexity results in a 21% increase in a firm's crash risk...

This written testimony accompanied Professor J.W. Verret's oral testimony before the House Committee on Financial Services. This testimony argues that executive compensation proposals by the Administration will not address any systemic risk posed by large financial institutions. It also argues...

The paper outlines the developments in the EU regulatory framework for executive remuneration since 2004 and going through the financial crisis. It also presents the results of an analysis of the remuneration practices adopted by the largest European listed firms before and after the crisis,...

Bank executives' compensation has been widely identified as a culprit in the Global Financial Crisis, and reform of banker pay is high on the public policy agenda. While Congress targeted its reforms primarily at bankers' equity-based pay incentives, empirical research fails to show any...

Usual measures of the risk-taking incentives of bank CEOs do not capture the risk-shifting incentives that the exposure of a CEO's wealth to his firm's stock price (delta) creates in highly levered firms. We find evidence consistent with the importance of these incentives for bank CEOs: In a...