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CEO Option Compensation, Risk-Taking Incentives, and Systemic Risk in the Banking Industry
| Content Provider | Semantic Scholar |
|---|---|
| Author | Kim, Jeong-Bon Ma, Mary L. Z. Song, Frank M. |
| Copyright Year | 2013 |
| Abstract | This study predicts and finds that chief executive officer (CEO) risk-taking incentives induced by stock option compensation increase a bank's contribution to systemic distress risk and systemic crash risk. We also predict and find that this CEO incentive systemic risk relation operates through three channels (i) a bank's engagement in non-interest income-generating activities, (ii) investments in innovative financial products such as collateralized debt obligations and credit default swaps, and (iii) maturity mismatch associated with on short-term debt financing. Finally, the CEO incentive-systemic risk relation is moderated by information transparency, bank size, market liquidity, and financial crisis. We also discuss relevant policy implications. |
| File Format | PDF HTM / HTML |
| DOI | 10.2139/ssrn.2346204 |
| Alternate Webpage(s) | https://efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2013-Reading/papers/EFMA2013_0567_fullpaper.pdf |
| Alternate Webpage(s) | http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2013-Reading/papers/EFMA2013_0567_fullpaper.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |