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Corporate Governance

: The Harvard Law School Corporate Governance Blog

Investment Bankers? Culture of Ownership?

By Harvard Law School Program on Corporate Governance

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Editor?s Note: The following post comes to us from Sanjai Bhagat, Professor of Finance at the University of Colorado at Boulder, and Brian Bolton of the Finance Department at the University of New Hampshire.

In the paper Investment Bankers? Culture of Ownership? which was recently made publicly available on SSRN, we study the executive compensation structure in the largest 14 U.S. financial institutions during 2000-2008. Our results are mostly consistent with and supportive of the findings of Bebchuk, Cohen and Spamann (2010), that is, managerial incentives matter. Incentives generated by executive compensation programs led to excessive risk-taking by banks leading to the current financial crisis. Our results are generally not supportive of the conclusions of Fahlenbrach and Stulz (2009) that the poor performance of banks during the crisis was the result of unforeseen risk.

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Full post as published by The Harvard Law School Corporate Governance Blog on October 29, 2010 (boomark / email).