A. Sinan Cebenoyan, Elizabeth S. Cooperman and Charles A. Register
While prior research finds evidence of significant performance persistence in banking, the issue of the determinants of such persistence has rarely been examined. In light of a…
Abstract
While prior research finds evidence of significant performance persistence in banking, the issue of the determinants of such persistence has rarely been examined. In light of a liberalized thrift takeover market, this study tests for persistence and then attempts to identify its determinants for U.S. thrifts operating during 1989 to 1994. A moral hazard hypothesis for losing persistence is examined, as well as the effectiveness of the takeover market in disciplining persistent losers. Results indicate significant performance persistence, with firms in the sample 16 times more likely to remain in an initial position as a winner, or loser, than to switch. Consistent with moral hazard, persistent losers exhibit low charter values and greater risk‐taking behavior, with the opposite relations for persistent winners. Finally, and perhaps most importantly, persistent losers generally had a significantly higher probability of subsequent takeover, indicating the effectiveness of the takeover market in disciplining poor performers.
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Aigbe Akhigbe, Jeff Madura and Huldah Ryan
Much attention has recently been directed toward the relationship between the performance of firms and compensation received by their respective CEOs. We assess this relationship…
Abstract
Much attention has recently been directed toward the relationship between the performance of firms and compensation received by their respective CEOs. We assess this relationship for commercial banks, as regulatory and other industry‐specific conditions can cause the performance‐compensation linkage in the banking industry to differ from that of industrial firms. We find that the accumulated human capital of CEOs and the bank size are positively related to the total compensation (including salary, bonus, and stock options) levels of bank CEOs. We also find a positive significant relationship between bank accounting performance proxies and CEO compensation level for all time horizons. Finally, we find a positive significant relationship between market‐based performance proxy and bank compensation.