Bank CEO pay-performance relations and the effects of deregu

The deregulation hypothesis that posits that bank CEO compensation became more sensitive to performance as bank management became less regulated was tested. A significant increase was observed in pay-performance sensitivities from the 1976-1981 regulation subsample to the 1982-1988 deregulation subs...

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Bibliographic Details
Published in:The Journal of business (Chicago, Ill.) Ill.), 1995-04, Vol.68 (2), p.231
Main Authors: Crawford, Anthony J, Ezzell, John R, Miles, James A
Format: Article
Language:English
Subjects:
Banking industry
Chief executive officers
Deregulation
Mathematical models
Pay for performance
Statistical analysis
Studies
Wages & salaries
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Summary:The deregulation hypothesis that posits that bank CEO compensation became more sensitive to performance as bank management became less regulated was tested. A significant increase was observed in pay-performance sensitivities from the 1976-1981 regulation subsample to the 1982-1988 deregulation subsample. These increases in pay sensitivities after deregulation are observed for salary and bonus, stock options, and common stock holdings. Increases in the pay-performance relation associated with high-capitalization-ratio banks were observed to be consistent with providing incentives for wealth creation, while even larger increases in pay-performance sensitivity for lower-capitalization-ratio banks suggest a Federal Deposit Insurance Corporation moral hazard problem.
ISSN:0021-9398
1537-5374