This paper develops a theoretical framework to study the impact of bonus caps on banks' risk taking. In the model, labor market price adjustments can offset the direct effects of bonus caps. The calibrated model suggests that bonus caps are only effective when bank executives' mobility is...

One of the most puzzling aspects of executive compensation is the pay gap that exists between American and foreign Chief Executive Officers (CEOs). Commentators and the financial press have been quick to argue that such differences are the result of high agency costs, or "board capture," a...

This paper investigates the effects of the Sarbanes-Oxley Act (SOX) on CEO compensation, using panel data constructed for the S&P 1500 firms on CEO compensation, financial returns, and reported accounting income. Empirically SOX (i) changes the relationship between a firm's abnormal returns and...

This paper investigates the effects of regulatory interventions on contracting relationships within firms by examining the impacts of the Sarbanes-Oxley Act (SOX) on CEO compensation. Using panel data of the S&P 1500 firms, it quantifies welfare gains from a dynamic principal-agent model of...

We study the dynamics of managerial influence and Chief Executive Officers' (CEOs) compensation over the course of financial distress during 1992 to 2012. Using a matching estimator to identify suitable controls, we find that under distress firms reduce managerial board appointments, intensify...

This paper investigates the effects of regulatory interventions on contracting relationships within firms by examining the impacts of the Sarbanes–Oxley (SOX) Act on CEO compensation. Using panel data of the S&P 1500 firms, it quantifies welfare gains from a principal–agent model with hidden...

This article presents a systematic review of the theoretical and empirical literature on option grants and managerial risk taking. One of the objectives is the motivation of further research on the topic. Risk-averse managers hold less diversified portfolios and, thus, tend to take less risk...

This study examines three issues related to the sensitivity of bank CEO compensation to risk, or vega: (1) its relevance compared with CEO compensation vega in industrial firms; (2) its determinants; and (3) its effect on bank risk-taking. Using a sample of 156 U.S. bank holding companies (BHCs)...

We conduct a field experiment where we vary both the presence of a gift exchange wage and the effect of the worker's effort on the manager's payoff. The results indicate a strong complementarity between the initial wage gift and the agent's ability to repay the gift. We collect information on...