Rights statement: This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Review of Finance following peer review. The definitive publisher-authenticated version Patricia Boyallian, Pablo Ruiz-Verdú; Leverage, CEO Risk-Taking Incentives, and Bank Failure during the 2007–10 Financial Crisis, Review of Finance, Volume 22, Issue 5, 1 August 2018, Pages 1763–1805, https://doi.org/10.1093/rof/rfx051 is available online at: https://academic.oup.com/rof/article/22/5/1763/4600197
Accepted author manuscript, 559 KB, PDF document
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Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Leverage, CEO Risk–Taking Incentives, and Bank Failure during the 2007–2010 Financial Crisis
AU - Boyallian, Patricia
AU - Ruiz-Verdu, Pablo
N1 - This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Review of Finance following peer review. The definitive publisher-authenticated version Patricia Boyallian, Pablo Ruiz-Verdú; Leverage, CEO Risk-Taking Incentives, and Bank Failure during the 2007–10 Financial Crisis, Review of Finance, Volume 22, Issue 5, 1 August 2018, Pages 1763–1805, https://doi.org/10.1093/rof/rfx051 is available online at: https://academic.oup.com/rof/article/22/5/1763/4600197
PY - 2018/8/1
Y1 - 2018/8/1
N2 - Usual measures of the risk-taking incentives of bank CEOs do not capture the risk-shifting incentives that the exposure of a CEO’s wealth to his firm’s stock price (delta) creates in highly levered firms. We find evidence consistent with the importance of these incentives for bank CEOs: In a sample of large U.S. financial firms, a higher pre-crisis delta is associated with a significantly higher probability of failure during the 2007–2010 financial crisis in highly levered firms, but not in less levered firms.
AB - Usual measures of the risk-taking incentives of bank CEOs do not capture the risk-shifting incentives that the exposure of a CEO’s wealth to his firm’s stock price (delta) creates in highly levered firms. We find evidence consistent with the importance of these incentives for bank CEOs: In a sample of large U.S. financial firms, a higher pre-crisis delta is associated with a significantly higher probability of failure during the 2007–2010 financial crisis in highly levered firms, but not in less levered firms.
KW - executive compensation
KW - financial crisis
KW - risk-taking incentives
KW - leverage
KW - banks
U2 - 10.1093/rof/rfx051
DO - 10.1093/rof/rfx051
M3 - Journal article
VL - 22
SP - 1763
EP - 1805
JO - Review of Finance
JF - Review of Finance
SN - 1572-3097
IS - 5
ER -