Financial Crisis, Corporate Governance, and Bank Capital

Sanjai Bhagat

• Publisher: Cambridge University Press
• Year: 2017
• Print ISBN: 9781107170643
• eBook ISBN: 9781316767221
• Topic: Business
• Subtopic: Finance
• Index: Business

In the aftermath of the 2007–8 crisis, senior policymakers and the media have blamed excessive risk-taking undertaken by bank executives, in response to their compensation incentives, for the crisis. The inevitable follow-up to this was to introduce stronger financial regulation, in the hope that better and more ethical behaviour can be induced. Despite the honourable intentions of regulation, such as the Dodd–Frank Act of 2010, it is clear that many big banks are still deemed too big to fail. This book argues that by restructuring executive incentive programmes to include only restricted stock and restricted stock options with very long vesting periods, and financing banks with considerably more equity, the potential of future financial crises can be minimized. It will be of great value to corporate executives, corporate board members, institutional investors and economic policymakers, as well as graduate and undergraduate students studying finance, economics and law.

Table of contents

• Cover
• Half-title page
• Title page
• Copyright page
• Dedication
• Contents
• List of Figures
• List of Tables
• Preface
• Acknowledgments
• 1 Introduction
• 2 Mortgage Public Policies and the Financial Crisis
• 3 Precrisis Executive Compensation and Misaligned Incentives
• 4 Managerial Incentives Hypothesis versus Unforeseen Risk Hypothesis
• 5 Bank CEOs’ Buys and Sells during 2000–8
• 6 Executive Compensation Reform
• 7 Director Compensation Policy
• 8 Are Large Banks Riskier?
• 9 Bank Capital Structure and Executive Compensation
• 10 Why Banks Should Be Mostly Debt Financed: Parade of Non Sequiturs
• 11 Conclusion
• Appendix A Credit-Rating Agencies and the Subprime Mortgage Securitization Process
• Appendix B Data Used in This Book: Available Online
• Notes
• Bibliography
• Index