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research article
Bank CEO incentives and the credit crisis
We investigate whether bank performance during the recent credit crisis is related to chief executive officer (CEO) incentives before the crisis. We find some evidence that banks with CEOs whose incentives were better aligned with the interests of shareholders performed worse and no evidence that they performed better. Banks with higher option compensation and a larger fraction of compensation in cash bonuses for their CEOs did not perform worse during the crisis. Bank CEOs did not reduce their holdings of shares in anticipation of the crisis or during the crisis. Consequently, they suffered extremely large wealth losses in the wake of the crisis.
Type
research article
Web of Science ID
WOS:000284679300002
Authors
Publication date
2011
Published in
Volume
99
Start page
11
End page
26
Peer reviewed
REVIEWED
EPFL units
Available on Infoscience
December 16, 2011
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