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

Fingerprint

Market power
Bank risk
Managerial incentives
Bank risk taking
Charter value
CEO ownership
Managers
Incentives
Endogeneity
Shareholders
Control variable
Bank holding companies
Bank regulation

Cite this

Haq, M., Williams, B., & Pathan, S. (2010). Managerial incentives, market power and bank risk taking. In 2010 AFAANZ Conference (pp. 1). [32] Accounting and Finance Association of Australia and New Zealand. https://doi.org/10.2139/ssrn.1537034
Haq, Mamiza ; Williams, Barry ; Pathan, Shams. / Managerial incentives, market power and bank risk taking. 2010 AFAANZ Conference. Accounting and Finance Association of Australia and New Zealand, 2010. pp. 1
@inproceedings{38821ca0bdc943f08b1b24790eb927ef,
title = "Managerial incentives, market power and bank risk taking",
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.",
author = "Mamiza Haq and Barry Williams and Shams Pathan",
year = "2010",
doi = "10.2139/ssrn.1537034",
language = "English",
pages = "1",
booktitle = "2010 AFAANZ Conference",
publisher = "Accounting and Finance Association of Australia and New Zealand",

}

Haq, M, Williams, B & Pathan, S 2010, Managerial incentives, market power and bank risk taking. in 2010 AFAANZ Conference., 32, Accounting and Finance Association of Australia and New Zealand, pp. 1, Accounting and Finance Association of Australia and New Zealand (AFAANZ) conference, Darwin, Australia, 3/07/11. https://doi.org/10.2139/ssrn.1537034

Managerial incentives, market power and bank risk taking. / Haq, Mamiza; Williams, Barry; Pathan, Shams.

2010 AFAANZ Conference. Accounting and Finance Association of Australia and New Zealand, 2010. p. 1 32.

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

TY - GEN

T1 - Managerial incentives, market power and bank risk taking

AU - Haq, Mamiza

AU - Williams, Barry

AU - Pathan, Shams

PY - 2010

Y1 - 2010

N2 - 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.

AB - 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.

U2 - 10.2139/ssrn.1537034

DO - 10.2139/ssrn.1537034

M3 - Conference contribution

SP - 1

BT - 2010 AFAANZ Conference

PB - Accounting and Finance Association of Australia and New Zealand

ER -

Haq M, Williams B, Pathan S. Managerial incentives, market power and bank risk taking. In 2010 AFAANZ Conference. Accounting and Finance Association of Australia and New Zealand. 2010. p. 1. 32 https://doi.org/10.2139/ssrn.1537034