Effectiveness and (in)efficiencies of compensation regulation : evidence from the EU banker bonus cap / Stefano Colonnello, Michael Koetter, Konstantin Wagner
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Effectiveness and (in)efficiencies of compensation regulation
Discovery
1019313544
URN
urn:nbn:de:gbv:3:2-89894
DOI
ISBN
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Publication history
Halle (Saale), Germany : Halle Institute for Economic Research (IWH) - Member of the Leibniz Association, [21. April 2018]
Content
1 Online-Ressource (III, 59 Seiten, 1,37 MB) : Diagramme
Edition
Language
eng
Comment
Abstract
We study if the regulation of bank executive compensation has unintended consequences. Based on novel data on CEO and non-CEO executives in EU banking, we show that capping the variable-to-fixed compensation ratio did not induce executives to abandon the industry. Banks indemnified executives sufficiently for the shock to retain them by raising fixed and lowering variable compensation while complying with the cap. At the same time, banks' risk-adjusted performance deteriorated due to increased idiosyncratic risk. Collateral damage for the financial system as a whole appears modest though, as average co-movement of banks with the market declined under the cap.
Series
IWH-Diskussionspapiere ; 2018, no. 7 (April 2018) ppn:837399270