scholarly journals Relative Wealth Concerns, Executive Compensation, and Systemic Risk-Taking

2016 ◽  
Vol 2016 (1164) ◽  
pp. 1-43 ◽  
Author(s):  
Qi Liu ◽  
◽  
Bo Sun
Keyword(s):  
Executive Compensation ◽  
Risk Taking ◽  
Systemic Risk ◽  
Relative Wealth

scholarly journals Executive Compensation and Risk Taking

2011 ◽  
Author(s):  
Patrick Bolton ◽  
Hamid Mehran ◽  
Joel D. Shapiro
Keyword(s):  
Executive Compensation ◽  
Risk Taking

Stock and Option Proportions in Executive Compensation

2011 ◽  
Vol 01 (01) ◽  
pp. 169-203 ◽  
Author(s):  
Phelim P. Boyle ◽  
Ranjini Jha ◽  
Shannon Kennedy ◽  
Weidong Tian
Keyword(s):  
Executive Compensation ◽  
Empirical Evidence ◽  
Risk Taking ◽  
Principal Agent ◽  
Optimal Contract ◽  
Efficient Mechanism ◽  
Opposite Conclusion

There is controversy about the relative merits of stock and options in executive compensation. Some observers contend that stock is a more efficient mechanism, while others reach the opposite conclusion. We focus on the manager's risk-taking incentives and derive an optimal compensation contract by using the concept of a comparable benchmark and imposing a volatility constraint in a principal-agent framework. We demonstrate a joint role for both stock and options in the optimal contract. We show that firms with higher volatility should use more options in compensating their executives and provide empirical evidence supporting this testable implication.

Optimal Executive Compensation versus Managerial Power: A Review of Lucian Bebchuk and Jesse Fried's Pay without Performance: The Unfulfilled Promise of Executive Compensation

2007 ◽  
Vol 45 (2) ◽  
pp. 419-428 ◽  
Author(s):  
Michael S Weisbach
Keyword(s):  
Executive Compensation ◽  
Effective Potential ◽  
Risk Taking ◽  
Corporate Performance ◽  
Policy Changes ◽  
Standard View ◽  
Compensation Systems ◽  
Managerial Power ◽  
Positive Perspective ◽  
Normative Perspective

This essay reviews Lucian A. Bebchuk and Jesse M. Fried's Pay without Performance: The Unfulfilled Promise of Executive Compensation. Bebchuk and Fried criticize the standard view of executive compensation, in which executives negotiate contracts with shareholders that provide incentives that motivate them to maximize the shareholders' welfare. In contrast, Bebchuk and Fried argue that executive compensation is more consistent with executives who control their own boards and who maximize their own compensation subject to an “outrage constraint.” They provide a host of evidence consistent with this alternative viewpoint. The book can be evaluated from both positive and normative perspectives. From a positive perspective, much of the evidence they present, especially about the camouflage and risk-taking aspects of executive compensation systems, is fairly persuasive. However, from a normative perspective, the book conveys the idea that policy changes can dramatically improve executive compensation systems and consequently overall corporate performance. It is unclear to me how effective potential reforms designed to achieve such changes are likely to be in practice.

Competition, Regulation, and Stability in Banking: Theory and Evidence

2016 ◽  
Author(s):  
Xavier Vives
Keyword(s):  
Risk Taking ◽  
Systemic Risk ◽  
Banking Sector ◽  
Regulatory Reform ◽  
Reform Process ◽  
Subprime Crisis ◽  
Empirical Perspective ◽  
The Relationship ◽  
Excessive Risk Taking ◽  
Excessive Risk

This chapter examines the relationship between competition and stability in the banking sector both from a theoretical and from an empirical perspective. It considers the competition–stability link from the standpoint of fragility both because of runs and because of excessive risk taking, along with the available evidence assessing how competition relates to systemic risk and how deregulation is associated with risk taking. It also explores the connection between market structure, consolidation, and internationalization and how it affects stability. Lessons from the subprime crisis are derived. The result of the analysis is to characterize the competition–stability trade-off, how regulation can alleviate it, and the need to coordinate competition policy and prudential regulation. The chapter concludes with a discussion of the regulatory reform process in the banking industry after the 2007–2009 crisis.

Sign in / Sign up

Export Citation Format

Share Document