Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/62056
Authors: 
Eufinger, Christian
Gill, Andrej
Year of Publication: 
2012
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2012: Neue Wege und Herausforderungen für den Arbeitsmarkt des 21. Jahrhunderts - Session: Banking F15-V1
Abstract: 
The paper analyzes the interaction between an endogenous capital structure and investment decision, and the incentive scheme of bank executives. We show that the implementation of capital requirements, which are contingent on compensation schemes, drive a wedge between the interests of the shareholder and the CEO. This non-alignment can mitigate excessive risk taking. In particular, linking the amount of insured debt to the ratio of fixed and performance based salary encourages first-best outcomes. We derive empirical predictions and policy implications.
JEL: 
G28
G32
G21
Document Type: 
Conference Paper

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