Executive Power?Deferred Executive Compensation Policies And Bank Risk Taking

In 2008,the financial crisis originated from the us real estate credit market swept across the world.The excessive risk-taking of commercial Banks has been highly concerned by the public,regulators and the academic circle,and the rationality of the compensation incentive system of commercial Banks has been widely questioned.And in the aftermath of the crisis,most foreign regulators have introduced "pay limits" for the sky-high pay in the banking industry.Foreign scholars pointed out that the compensation incentive method similar to stock option incentive is an important cause of systemic financial risks,and proposed to include the debt incentive method such as deferred compensation and pension system in the compensation incentive scheme of the banking industry,so as to curb the incentive of senior executives' risk transfer.On March 10,2010,China's banking supervision commission officially promulgated the"guidelines on the supervision of sound remuneration of commercial Banks",which put forward the requirement of delaying payment according to a certain proportion in the compensation system of senior executives of commercial Banks.40%of their performance compensation should be paid in installments under the premise of no business risks in the next three years.This article will focus on the effect of the policy of "regulatory guidelines" in 2010,by relying on the "natural experiment" tendency of double difference method of score matching(PSM-DID)and 126 commercial Banks in 2008-2017 data,inspection deferred compensation policy can effectively reduce the bank risk bearing level,and the channel effect of deferred pay policy impact on Banks' risk are discussed.The empirical results show that:(1)the implementation of the deferred executive compensation policy effectively integrates the interests of bank executives and creditors,inhibits the risk transfer motivation of bank executives,and has a significant inhibitory effect on the bank's risk bearing level.(2)the implementation of the deferred executive compensation policy makes the senior executives of Banks tend to be conservative in their business choices,which significantly increases the proportion of non-interest income of commercial Banks,reduces the extent of their maturity mismatch,and indirectly reduces the risk bearing level of commercial Banks.In addition,this paper refers to the interactive model of executive power and compensation incentive of Victoravich et al.(2011).In the DID basic model,the executive power variable and the deferred compensation policy were introduced into the triple interaction terms to further explore the impact of executive power on the risk constraint effect of the deferred compensation policy.The empirical results show that when the bank executive power intensity bigger,its risk consciousness is stronger,higher sensitivity to delay payment policy,and when the power is bigger more has the ability to make decisions in accordance with its will,therefore,bank executives have ability and more power intensity bigger intend to avoid risk in business decisions,and the risk of deferred pay policy constraint effect is more significant.Based on the related literature on executive power the adjustment effect of risk constraint effect of deferred pay related in this paper,the theory of mechanism,effectively supplement the domestic about internal governance and salary incentive in risk constraint on the study of the interaction,the establishment of compensation system,internal governance mechanism reform prudential supervision and regulation department has a certain practical significance.