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Curbing expense preference behaviour in commercial banking: econometric evidence

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  • Franklin Mixon
  • Kamal Upadhyaya

Abstract

This study employs a large, micro-data set to examine the use of incentives and bonuses in the contracts of CEOs of banking firms in the USA in an effort by the owners of these banking concerns to curb potential expense preference behaviour by the CEO. Fixed-effects regression results confirm the prevalence of bonuses and stock options relative to salary for bank CEOs, and the model presented here works to support the principal-agent model in the economics and finance literature. Meta-analysis also establishes a link between a banking concern's efforts to curb expense preference behaviour and the percentage growth rate of the bank's net income.

Suggested Citation

  • Franklin Mixon & Kamal Upadhyaya, 2001. "Curbing expense preference behaviour in commercial banking: econometric evidence," Applied Financial Economics, Taylor & Francis Journals, vol. 11(6), pages 613-617.
    • Handle: RePEc:taf:apfiec:v:11:y:2001:i:6:p:613-617
    DOI: 10.1080/096031001753266902
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    Cited by:

    1. Luis Granero & Juan Carlos Reboredo, 2006. "Competition and R&D in retail banking under expense preference behaviour," Applied Economics Letters, Taylor & Francis Journals, vol. 13(1), pages 47-50.

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