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Bank CEO Pay-Performance Relations and the Effects of Deregulation

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  • Crawford, Anthony J
  • Ezzell, John R
  • Miles, James A

Abstract

The authors test the deregulation hypothesis that posits that bank CEO compensation became more sensitive to performance as bank management became less regulated. They observe a significant increase in pay-performance sensitivities from their 1976-81 regulation subsample to their 1982-88 deregulation subsample. These increases in pay sensitivities after deregulation are observed for salary and bonus, stock options, and common stock holdings. The authors observe increases in the pay-performance relation associated with high-capitalization-ratio banks, consistent with providing incentives for wealth creation while even larger increases in pay-performance sensitivity for lower capitalization-ratio banks suggest an Federal Deposit Insurance Corporation moral hazard problem. Copyright 1995 by University of Chicago Press.

Suggested Citation

  • Crawford, Anthony J & Ezzell, John R & Miles, James A, 1995. "Bank CEO Pay-Performance Relations and the Effects of Deregulation," The Journal of Business, University of Chicago Press, vol. 68(2), pages 231-256, April.
    • Handle: RePEc:ucp:jnlbus:v:68:y:1995:i:2:p:231-56
    DOI: 10.1086/296662
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