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Sustainable Compensation And Performance: An Empirical Analysis Of European Banks

Author

Listed:
  • ELISABETTA D’APOLITO

    (Department of Economics, University of Foggia, Italy)

  • ANTONIA P. IANNUZZI

    (#x2020;Department of Economics, Management and Business Law, University of Bari, Italy)

  • STEFANIA SYLOS LABINI

    (Department of Economics, University of Foggia, Italy)

  • EDGARDO SICA

    (#x2021;Department of Communication and Social Research (CORIS), ‘La Sapienza’, University of Rome, Italy)

Abstract

This study investigates the financial and non-financial impacts of the use of sustainability criteria in banks’ executive compensation plans. The sample covers all the globally and systemically important European banks over the period 2013–2017. Panel data-fixed effect estimations are employed to mitigate endogeneity concerns and to control for within-firm dynamics. The implementation of sustainable criteria in the banks’ remuneration contracts was found to (i) negatively impact economic performance, (ii) negatively impact the riskiness profile, and (iii) positively impact sustainability performance. These findings have important implications for investors as well as banks. Indeed, these results are encouraging for the use of sustainability targets in executive compensation for restricting excessive risk-taking behaviors and improving sustainability performance.

Suggested Citation

  • Elisabetta D’Apolito & Antonia P. Iannuzzi & Stefania Sylos Labini & Edgardo Sica, 2019. "Sustainable Compensation And Performance: An Empirical Analysis Of European Banks," Journal of Financial Management, Markets and Institutions (JFMMI), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-30, June.
    • Handle: RePEc:wsi:jfmmix:v:07:y:2019:i:01:n:s2282717x19400048
    DOI: 10.1142/S2282717X19400048
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    Citations

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    Cited by:

    1. Patrick Velte, 2024. "Archival research on sustainability‐related executive compensation. A literature review of the status quo and future improvements," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 3119-3147, July.
    2. Wenli Wang & Liangjie He & Jie Ma & Chun-Ping Chang, 2024. "Executive compensation, equity structure and risk-taking in Chinese banks," Economic Change and Restructuring, Springer, vol. 57(3), pages 1-28, June.
    3. Douglas A. Adu & Basil Al‐Najjar & Thitima Sitthipongpanich, 2022. "Executive compensation, environmental performance, and sustainable banking: The moderating effect of governance mechanisms," Business Strategy and the Environment, Wiley Blackwell, vol. 31(4), pages 1439-1463, May.
    4. Patrick Velte, 2023. "Sustainable institutional investors and corporate biodiversity disclosure: Does sustainable board governance matter?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 3063-3074, November.
    5. Simona Galletta & Sebastiano Mazzù & Valeria Naciti, 2021. "Banks' business strategy and environmental effectiveness: The monitoring role of the board of directors and the managerial incentives," Business Strategy and the Environment, Wiley Blackwell, vol. 30(5), pages 2656-2670, July.

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