Executive compensation and bank risk in China

Authors

  • Qiubin Huang University of Science and Technology Beijing

DOI:

https://doi.org/10.17811/ebl.12.1.2023.62-67

Keywords:

Executive compensation, Bank risk, Chinese banks, Corporate governance

Abstract

Executive compensation is an important mechanism of corporate governance for banks, but its effect on bank risk remains inconclusive. Based on a sample of banks listed in China, we uncover a significantly positive relationship between executive compensation and bank risk during the 2007–2018 period. The finding is robust to model specifications, the risk measures used, and the way to calculate executive compensation.

References

Bai, H., Ba, S., Huang, W., Hu, W., 2019. Expected government support and bank risk-taking: Evidence from China. Finance Research Letters 101328.

Balli, H.O., Sørensen, B.E., 2013. Interaction effects in econometrics. Empirical Economics 45, 583–603.

Bhagat, S., Bolton, B., 2014. Financial crisis and bank executive incentive compensation. Journal of Corporate Finance 25, 313–341.

Bian, W., Deng, C., 2017. Ownership dispersion and bank performance: Evidence from China. Finance Research Letters 22, 49–52.

Bolton, P., Mehran, H., Shapiro, J., 2015. Executive compensation and risk taking. Review of Finance 19, 2139–2181.

Conyon, M.J., He, L., 2011. Executive compensation and corporate governance in China. Journal of Corporate Finance 17, 1158–1175.

Fan, J.P.H., Wong, T.J., Zhang, T., 2014. Politically connected CEOs, corporate governance, and the Post-IPO performance of China’s partially privatized firms. Journal of Applied Corporate Finance 26, 85–95.

Gande, A., Kalpathy, S., 2017. CEO compensation and risk-taking at financial firms: Evidence from U.S. federal loan assistance. Journal of Corporate Finance 47, 131–150.

Guo, L., Jalal, A., Khaksari, S., 2015. Bank executive compensation structure, risk taking and the financial crisis. Review of Quantitative Finance and Accounting 45, 609–639.

Huang, Q., 2020. Ownership concentration and bank profitability in China. Economics Letters, accepted.

Huang, Q., De Haan, J., Scholtens, B., 2019. Analysing systemic risk in the Chinese banking system. Pacific Economic Review 24, 348–372.

Hung, C.H.D., Jiang, Y., Liu, F.H., Tu, H., Wang, S., 2017. Bank political connections and performance in China. Journal of Financial Stability 32, 57–69.

Jiang, F., Kim, K.A., 2020. Corporate governance in China: A survey. Review of Finance 1–40.

Jiang, W., Liu, Y., Lobo, G.J., Xu, Y., 2019. Deferred cash compensation and risk-taking: Evidence from the Chinese banking industry. Pacific Basin Finance Journal 53, 432–448.

Kuo, H.C., Lin, D., Lien, D., Wang, L.H., Yeh, L.J., 2014. Is there an inverse U-shaped relationship between pay and performance? North American Journal of Economics and Finance 28, 347–357.

Laeven, L., Levine, R., 2009. Bank governance, regulation and risk taking. Journal of Financial Economics 93, 259–275.

Shah, S.Z.A., Akbar, S., Liu, J., Liu, Z., Cao, S., 2017. CEO compensation and banks’ risk-taking during pre and post financial crisis periods. Research in International Business and Finance 42, 1489–1503.

Zhang, J., Wang, P., Qu, B., 2012. Bank risk taking, efficiency, and law enforcement: Evidence from Chinese city commercial banks. China Economic Review 23, 284–295.

Downloads

Published

26-03-2023

How to Cite

Huang, Q. (2023). Executive compensation and bank risk in China. Economics and Business Letters, 12(1), 62–67. https://doi.org/10.17811/ebl.12.1.2023.62-67

Issue

Section

Articles