Full metadata record
|dc.contributor.author||Senbet, Lemma W.||-|
|dc.description.abstract||This paper examines the incentive structure underlying the current features of bank regulation. We show that capital regulation has limited effectiveness, given the observed high leverage ratios of banks. We propose instead a more direct and effective mechanism of influencing incentives through the role of top-management compensation, whereby a fair and revenue-neutral FDIC premium incorporates incentive features of top-management compensation. With this pricing scheme (for FDIC insurance), we show that bank owners choose an optimal management compensation structure which induces first-best value-maximizing investment choices by a bank's management. We also characterize the parameters of the optimal managerial compensation structure and the FDIC premium schedule explicitly.||en|
|dc.title||A Theory of Bank Regulation and Management Compensation||en|
|Appears in Collections:||Economics Working Papers|
Items in FDA are protected by copyright, with all rights reserved, unless otherwise indicated.