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Managerial Incentives, Market Power And Bank Risk Taking, Mamiza Haq, Shams Pathan, Barry Williams
Managerial Incentives, Market Power And Bank Risk Taking, Mamiza Haq, Shams Pathan, Barry Williams
Barry Williams
We investigate the effect of managerial incentives and market power on bank risk‐taking for a sample of 212 large US bank holding companies over 1997‐2004 (i.e. 1,534 observations). Bank managers have incentives to prefer less risk while bank shareholders have preference for ‘excessive’ risk. Likewise, the market power is the centre piece of any bank regulation.However, the literature is inconclusive as to the effect of managerial incentives and market power on bank risk‐taking. Our results reveal a U‐shaped relation between bank risk and CEO ownership (proxy for managerial incentives) and between bank risk and charter value (proxy for market power). …