Bank CEO pay-performance relations and the effects of deregulation

Article Abstract:

The deregulation hypothesis holds that compensation for bank chief executives became more sensitive to bank performance as a result of the deregulation of bank management. To test this theory, a study is conducted focusing on three components of executive compensation, namely salary and bonus, stock option holdings, and insider stock ownership. For the study, 1976-1988 data on the salary and bonus of 215 CEOs from 118 commercial banks are collected. Data on options and stock holdings of 75 CEOs from 37 commercial banks are gathered. Results show that there is a substantial rise in the relationship between CEO pay and bank performance after 1981, the year that deregulation is introduced. This finding supports conclusions made in the area of economic research on moral hazard and adverse selection problems.

Banking industry, Compensation and benefits, Executives, Executive compensation, Deregulation

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Management's incentives, equity's bargaining power, and deviations from absolute priority in Chapter 11 bankruptcies

Article Abstract:

The cross-sectional factors affecting equity's absolute priority deviations in Chapter 11 bankruptcies are examined. Prior studies indicate that priority deviations reflect the value of equity's option to defer reorganization. However, control of this option is held more strongly by managers than by shareholders, and agency problems between the bankrupt firm's shareholders and managers can be excessive. For the study, 75 firms that made Chapter 11 filings and confirmed their reorganization intentions between 1982 and 1990 are examined. Results show that larger priority deviations occur when the firm is closer to solvency, banks have less claims, the CEO possesses more shares, CEO pay and shareholder wealth have a positive relationship, and the firm maintains the sole right to make a bankruptcy plan.

Bankruptcy

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Compensation, turnover, and top management incentives: historical evidence

Article Abstract:

Research was conducted on the effects of regulatory and political constraints on corporate governance and management incentives. Evidence presented reveals that regulatory and political changes since the 1930s are not responsible for a weak correlation of performance and top executive turnover in the present set-up. Results show that incentive compensation has been widely used since 1934. The findings also indicate that there is a strong correlation between internal and external control activities but there is a need for further research to understand the link better.

Employee turnover

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