EXECUTIVE COMPENSATION, FIRM PERFORMANCE AND RISK IN THE FINANCIAL CRISIS PERIOD 2006-2009: AN ANALYSIS OF NASDAQ COMPANIES
Chandra Shekhar Bhatnagar, Quinn AR Trimm

Abstract
We explore the Agency and Managerial Power theories to explain the relationship among the various components of executive compensation, firm performance and unsystematic risk in the US financial sector. Institutions in the financial sector listed on the NASDAQ that have been in existence from the pre-financial crisis period January 03, 2006 to the post-financial crisis period December 272009 are examined. We find that the Agency theory does not fully explain the behavior of executives and their risk appetite. Managerial power theory fares better in this regard, as managers are focused mostly on their base salary. The data analysis shows that stock options are not significantly influenced by unsystematic risk; instead the base salary of executives has been significantly influenced by market risk and firm performance.

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