Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/227086
Authors: 
Colonnello, Stefano
Koetter, Michael
Wagner, Konstantin
Year of Publication: 
2020
Series/Report no.: 
IWH Discussion Papers No. 7/2018
Abstract: 
We investigate the (unintended) effects of bank executive compensation regulation. Capping the share of variable compensation spurred average turnover rates driven by CEOs at poorly performing banks. Other than that, banks' responses to raise fixed compensation sufficed to retain the vast majority of non-CEO executives and those at well performing banks. We fail to find evidence that banks with executives that are more affected by the bonus cap became less risky. In fact, numerous results indicate an increase of risk, even in its systemic dimension according to selected measures. The return component of bank performance appears to be unaffected by the bonus cap. Risk hikes are consistent with an insurance effect associated with raised the increase in fixed compensation of executives. The ability of the policy to enhance financial stability is therefore doubtful.
Subjects: 
banks
bonus cap
executive compensation
executive turnover
JEL: 
G21
G32
G34
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.