CEO Compensation at Financial Firms

Amar Gande, Swaminathan L. Kalpathy
2011 Social Science Research Network  
We examine whether CEO compensation before the 2007 financial crisis led to excessive risk taking in sixty-nine large financial firms. Risk taking is proxied by the extent of U.S. Federal Reserve emergency loans provided to these firms. We find that the amount of emergency loans and total days the loans are outstanding are both increasing in pre-crisis CEO risk-taking incentives. Consistent with the secretive nature of these loan programs, the extent of loan assistance is uncorrelated with
more » ... orrelated with crisis period stock returns. Our results somewhat support recent regulatory initiatives on managerial incentive compensation for systemically important financial firms.
doi:10.2139/ssrn.1865870 fatcat:gyrqcuiyzraalkksh3azao5gqe