Study On The Relationship Between Chinese Listed Commercial Banks Executive Compensation And Risk-taking

In 2007, the international financial crisis triggered by America’s Subprime crisis resulted in the world economy into a slow economic growth. Some scholars agree the main reasons for the financial crisis is that the financial companies pay attention to their own interests too much and the financial executive pursuit of high salary excessively. Public opinion tends to strengthen commercial banks’ risk control and limit excessive executive compensation generally. Therefore, how commercial banks apply risk management and executive compensation incentive and constraint mechanism to the bank management become an important topic for the study of contemporary banks.This paper studies on the relationship between Chinese listed commercial banks executive compensation and risk-taking and reasons and ways forming the connection. First of all, this paper develops a basic model to research the association between banks executive compensation and risk-taking. Secondly, the paper introduces bank performance into the basic model to study the cause for the relationship. Thirdly, the paper analyzes the forming way of this relationship from the bank business and investment assets.The paper follows the main conclusions through the empirical research.(1) The bank executive compensation and risk-taking exists a positive relationship between each other. On the one hand, the executive pay increasing will enhance the risk-taking by banks. On the other hand, bank risk-taking increases will stimulate the rising executive pay.(2) Bank performance has positive influence on bank executive pay sensitivity to risk. Bank performance rising stimulates executive pay sensitivity to risk.(3) Non-interest income has positive affect on bank executive pay sensitivity to risk. The higher the bank’s non-interest income rate is its executive pay has a higher sensitivity to risk.(4) Bank short-term investment intensity also has negative influence on bank executive pay sensitivity to risk. Bank holding short-term investment assets rising will decrease the sensitivity of the executive compensation for risk.