Executive pay and performance: did bankers’ bonuses cause the crisis?

Paul Gregg, Sarah Jewell, Ian Tonks

Research output: Contribution to journalArticle

  • 37 Citations

Abstract

This paper examines the pay-performance relationship between executive cash compensation (including bonuses) and company performance for a sample of large UK companies, focusing particularly on the financial services industry, since incentive misalignment has been blamed as one of the factors causing the global financial crisis of 2007–2008. Although we find that pay in the financial services sector is high, the cash-plus-bonus pay-performance sensitivity of financial firms is not significantly higher than in other sectors. Consequently, we conclude that it unlikely that incentive structures could be held responsible for inducing bank executives to focus on short-term results.
LanguageEnglish
Pages89-122
JournalInternational Review of Finance
Volume12
Issue number1
DOIs
StatusPublished - Mar 2012

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Cash
Bonuses
Bankers
Executive pay
Financial services
Pay-performance sensitivity
Performance pay
Service sector
Bonus
Global financial crisis
Financial services industry
Incentives
Incentive structure
Misalignment
Company performance
Factors

Cite this

Executive pay and performance : did bankers’ bonuses cause the crisis? / Gregg, Paul; Jewell, Sarah; Tonks, Ian.

In: International Review of Finance, Vol. 12, No. 1, 03.2012, p. 89-122.

Research output: Contribution to journalArticle

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