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Pay transparency, bank and non-bank employment, and loan performance

Author

Listed:
  • Piotr Danisewicz

    (Tilburg University - Department of Finance)

  • Steven Ongena

    (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

Abstract

How does pay transparency affect the granting of credit by loan officers? We answer this question by studying the impact of the introduction of pay transparency laws across nine U.S. states with both individualand bank level data. Pay transparency laws spur bank employees, in particular loan officers, to leave for non-banks. Wages are traditionally higher there, and banks respond to these additional employee departures by increasing their own employee compensation. This catch-up in bank wages and the potential new hiring of employees then ostensibly leads to more bank risk-taking and lower bank loan performance.

Suggested Citation

  • Piotr Danisewicz & Steven Ongena, 2024. "Pay transparency, bank and non-bank employment, and loan performance," Swiss Finance Institute Research Paper Series 24-41, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2441
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    More about this item

    Keywords

    Pay transparency; wage increases; financial institutions; loan performance;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G01 - Financial Economics - - General - - - Financial Crises

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