Risk-taking incentives through excess variable compensation: Evidence from European banks
A. Uhde, The Quarterly Review of Economics and Finance 60 (2016) 12–28.
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Abstract
Employing compensation data provided by 63 banks from 16 European countries for the period from 2000 to 2010 this paper empirically investigates the impact of excess variable compensation on bank risk. As a main finding, we provide evidence for a risk-increasing impact of excess variable pay for both executive variable cash-based and variable equity-based compensation. This baseline finding holds under various robustness checks, in particular when controlling for likely reverse causality between bank risk and variable compensation by employing Granger-causality tests and instrumental variable regressions. In addition, results from a large number of sensitivity analyses including board and banking characteristics as well as the financial crisis period and the quality of a country's regulatory framework provide further important implications for banking regulators and politicians in Europe.
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The Quarterly Review of Economics and Finance
Volume
60
Issue
5
Page
12-28
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Uhde A. Risk-taking incentives through excess variable compensation: Evidence from European banks. The Quarterly Review of Economics and Finance. 2016;60(5):12-28. doi:https://doi.org/10.1016/j.qref.2015.11.009
Uhde, A. (2016). Risk-taking incentives through excess variable compensation: Evidence from European banks. The Quarterly Review of Economics and Finance, 60(5), 12–28. https://doi.org/10.1016/j.qref.2015.11.009
@article{Uhde_2016, title={Risk-taking incentives through excess variable compensation: Evidence from European banks}, volume={60}, DOI={https://doi.org/10.1016/j.qref.2015.11.009}, number={5}, journal={The Quarterly Review of Economics and Finance}, publisher={Elsevier}, author={Uhde, André}, year={2016}, pages={12–28} }
Uhde, André. “Risk-Taking Incentives through Excess Variable Compensation: Evidence from European Banks.” The Quarterly Review of Economics and Finance 60, no. 5 (2016): 12–28. https://doi.org/10.1016/j.qref.2015.11.009.
A. Uhde, “Risk-taking incentives through excess variable compensation: Evidence from European banks,” The Quarterly Review of Economics and Finance, vol. 60, no. 5, pp. 12–28, 2016, doi: https://doi.org/10.1016/j.qref.2015.11.009.
Uhde, André. “Risk-Taking Incentives through Excess Variable Compensation: Evidence from European Banks.” The Quarterly Review of Economics and Finance, vol. 60, no. 5, Elsevier, 2016, pp. 12–28, doi:https://doi.org/10.1016/j.qref.2015.11.009.
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