Research On The Impact Of Executive Compensation Deferral On The Performance Of Commercial Banks

The 2008 financial tsunami of the US sub-prime mortgage crisis swept the world,fuelled by executive compensation incentives with a convexity profile.The unreasonable salary incentive system strengthens the motivation of financial institution managers to pursue short-term benefits,and excessive risk-taking levels lead to the concentration of potential risks accumulated by institutions for a long time,causing a huge impact on the financial system of a country and even the world.The global financial regulatory system aims at financial security and stability,and pays more attention to the relationship between the risk-taking behavior of the management of financial institutions and the executive compensation incentive system.In this context,countries have begun to incorporate the reform of the executive compensation system into the financial supervision system and internal governance mechanism.Since then,how to establish an effective incentive and constraint compensation system has also attracted more attention,and deferred payment of executive compensation is one of the important institutional arrangements.In 2010,China’s Banking Regulatory Commission promulgated the Guidelines for the Supervision of Prudent Remuneration of Commercial Banks,which stipulates the deferred payment of remuneration for senior executives of commercial banks,establishes a salary recovery and rebate mechanism,links bank risk,cost deduction and sustainable development with executive compensation,gives full play to the guiding role of executive compensation in the corporate governance of commercial banks,and promotes the stable operation and sustainable development of the banking industry.On this basis,the significance of this paper is to study the impact of executive compensation deferral on the performance of commercial banks and provide certain references for the design of bank compensation system in China.This paper first expounds the research background and research significance from the background of the financial crisis caused by the failure of executive compensation incentives.Secondly,the related concepts such as salary deferral and risk bearing are defined and summarized,and the relevant basic theories are discussed.Then,the impact mechanism of executive compensation deferral on bank performance is analyzed,and a research hypothesis is proposed.Finally,using the unbalanced panel data of 143 banks from 2009 to 2021,the multi-time point double difference model and the mediation effect model were used for empirical analysis to further verify the heterogeneity and test the differences in the implementation effect of executive compensation deferral between different banks.The empirical results show that the deferral of executive compensation is negatively correlated with bank performance,and bank risk-taking plays a partial mediating effect.From the perspective of bank heterogeneity,state-owned banks,urban commercial banks,rural commercial banks,unlisted banks and large,medium and small banks all show the curbing effect of the executive compensation deferral policy on bank performance,and joint-stock banks show the promotion effect of the executive pay deferral policy on bank performance,that is,there is a certain bank heterogeneity.As a result of the previous theoretical and empirical studies,this paper concludes that executive compensation deferral policies can significantly affect bank performance and impair bank performance,and that bank risk-taking plays a part in mediating this effect.Considering the perspective of bank heterogeneity,state-owned banks,urban commercial banks,rural commercial banks,non-listed banks and large,medium and small banks all show the curbing effect of executive pay deferral policies on bank performance,while equity banks show the facilitating effect of executive pay deferral policies on bank performance,in other words,there is a certain degree of bank heterogeneity.According to the empirical results,this paper proposes the following policy recommendations:strengthen the regulation of executive pay deferral policy,set up a diversified executive pay incentive system,improve the incentive mechanism of executive pay in the banking industry,and optimize the pay deferral policy.