Investment horizon, risk, and compensation in the banking industry

Détails

ID Serval
serval:BIB_084E9788F7FD
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Institution
Titre
Investment horizon, risk, and compensation in the banking industry
Périodique
Journal of Banking & Finance
Auteur⸱e⸱s
Livne Gilad, Markarian Garen, Mironov Maxim
ISSN
0378-4266
Statut éditorial
Publié
Date de publication
09/2013
Volume
37
Numéro
9
Pages
3669-3680
Langue
anglais
Notes
https://doi.org/10.1016/j.jbankfin.2013.05.021
Résumé
This paper examines the relation between the investment horizon of banks and their CEO compensation, and its consequences for risk and performance. We find that banks with short-term investment intensity pay more cash bonus, exhibit higher risk and perform more poorly than banks with longer-term investment intensity. This evidence is broadly consistent with the view that short-term means of compensation encouraged a short-term investment focus, which in turn led to both higher risk and resulted in poorer performance, culminating in the sub-prime crisis. The inverse risk-performance relation suggests pay schemes were incongruent with shareholders’ interest. Moreover, pay arrangements used in banks prior to the subprime crisis exposed banks to the ex-post settling up problem (the clawback problem).
Mots-clé
Economics and Econometrics, Finance
Web of science
Création de la notice
05/05/2021 9:03
Dernière modification de la notice
06/05/2021 5:35
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