edoc

Preaching water but drinking wine? Relative performance evaluation in international banking

Ilić, Dragan and Pisarov, Sonja and Schmidt, Peter S.. (2019) Preaching water but drinking wine? Relative performance evaluation in international banking. Swiss Journal of Economics and Statistics, 155 (6).

[img] PDF - Published Version
Available under License CC BY (Attribution).

693Kb

Official URL: https://edoc.unibas.ch/70707/

Downloads: Statistics Overview

Abstract

The rise in the level of executive compensation in international banking in the last two decades has been striking. At the same time, corporate declarations of relative performance evaluation (RPE) have enjoyed widespread popularity. RPE determines the level of CEO pay by accounting for common market shocks that are out of a CEO's control, providing better governance and incentivizing CEOs to maximize shareholder value. In this paper, we test for evidence of RPE in international banking and pay particular attention to banks that openly disclose its use. To that end, we collect compensation data on 46 large international banks. Taken as a whole, our sample shows moderate evidence consistent with RPE. We report stronger evidence once we investigate the subsample of RPE-disclosing banks. These results hold up to a series of robustness checks. In addition, we find that the use of RPE is positively related to firm size and negatively related to growth options.
Faculties and Departments:06 Faculty of Business and Economics
06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften
06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Mikroökonomische Theorie (Nöldeke)
UniBasel Contributors:Ilić, Dragan
Item Type:Article, refereed
Article Subtype:Research Article
Publisher:Springer Open
Note:Publication type according to Uni Basel Research Database: Journal article
Language:English
Identification Number:
Last Modified:25 Jun 2019 15:14
Deposited On:25 Jun 2019 15:14

Repository Staff Only: item control page