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CEO compensation and bank’s performance following bank-rescue

Author

Listed:
  • Rukaiyat Adebusola Yusuf
  • Mamiza Haq

Abstract

Purpose - This paper examines the effect of restrictions on executive pay and high CEOs’ compensation on bank performance following the “2008 UK bank rescue policy”. Design/methodology/approach - Using the difference-in-difference estimation technique we assess the relationship between executive compensation and financial performance of rescued banks relative to non-rescued banks over the period 1999–2019. Findings - Our main finding indicates that the relationship between executive compensation and financial performance declines in rescued banks relative to non-rescued banks. Further, we document that performance continues to deteriorate in rescued banks relative to non-rescued banks. Our results are robust to different estimation techniques. Originality/value - This study contributes to the literature that examines the efficacy of government bailouts during the 2008 crisis. To the best of the author’s knowledge, this study is among the first to examine the long-term implications of bank rescue and pay restrictions on executive compensation and performance post–rescue.

Suggested Citation

  • Rukaiyat Adebusola Yusuf & Mamiza Haq, 2024. "CEO compensation and bank’s performance following bank-rescue," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 21(2), pages 390-412, September.
    • Handle: RePEc:eme:ijmfpp:ijmf-09-2023-0469
    DOI: 10.1108/IJMF-09-2023-0469
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    More about this item

    Keywords

    Government interventions; CEO compensation; Pay-performance-sensitivity; UK banks; G21; G02; G38; M12; M52; J33;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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