Widespread losses during the recent financial crisis have increased concerns that equity-based compensation for bank CEOs causes excessive risk-taking by banks. Debt-based compensation, so-called inside debt, aligns the interests of CEOs with those of external creditors. We examine whether...

Using a unique international dataset, we show that the CEOs of large banks exhibit an increased probability of forced turnover when their organizations are more exposed to idiosyncratic tail risks. The importance of idiosyncratic tail risk in CEO dismissals is strengthened when there is more...

There is a paucity of research on the impact of domestic M&As on bank risk profiles. This paper exploits a rich database of Spanish banks during 1986-2010 to study the changes in bank risk profiles immediately before and after domestic M&As. Our results control for potential selection bias and...

We analyze the impact of incentive mechanisms embedded in executive remuneration contracts on the risk choices made by bank CEOs. For a panel of US and European banks, we employ the Merton distance to default model to estimate how bonus payments and option holdings impact the level of bank...

Advocates of diversifying bank income sources often argue that diversification improves the resilience of banks during periods of distress. To test this proposition, we analyze the impact of income diversification on the performance of Italian banks during the recent financial crisis. Using...