Managerial incentives, market power and bank risk taking

Mamiza Haq, Barry Williams, Shams Pathan

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

Abstract

We investigate the effect of managerial incentives and market power on bank risk-taking for a sample of 212 large US bank holding companies over 1997-2004 (i.e. 1,534 observations). Bank managers have incentives to prefer less risk while bank shareholders have preference for 'excessive' risk. Likewise, the market power is the centrepiece of any bank regulation. However, the literature is inconclusive as to the effect of managerial incentives and market power on bank risk-taking. Our results reveal a U-shape relation between bank risk and CEO ownership (proxy for managerial incentives) and between bank risk and charter value (proxy for market power). Particularly, we find that bank risk initially decreases and then increases with both CEO ownership and charter value. These convex relations are robust to various bank risk proxies, different estimation approaches to account for endogeneity and several bank specific control variables.
Original languageEnglish
Title of host publication2010 AFAANZ Conference
PublisherAccounting and Finance Association of Australia and New Zealand
Pages1
Number of pages32
DOIs
Publication statusPublished - 2010
EventAccounting and Finance Association of Australia and New Zealand (AFAANZ) conference - Darwin, Darwin, Australia
Duration: 3 Jul 20115 Jul 2011
http://www.afaanz.org/conferences

Conference

ConferenceAccounting and Finance Association of Australia and New Zealand (AFAANZ) conference
Abbreviated titleAFAANZ 2011
CountryAustralia
CityDarwin
Period3/07/115/07/11
Internet address

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