Efing, Matthias, Hau, Harald, Kampkötter, Patrick and Rochet, Jean-Charles (2023) Bank Bonus Pay as a Risk Sharing Contract. Review of Financial Studies, vol. 36 (n° 1). pp. 235-280.

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Identification Number : 10.1093/rfs/hhac030


We argue that risk sharing motivates the bankwide structure of bonus pay. In the presence of financial frictions that make external financing costly, the optimal contract between shareholders and employees involves some degree of risk sharing whereby bonus pay partially absorbs negative earnings shocks. Using payroll data for 1.26 million employee-years in all functional divisions of Austrian, German, and Swiss banks, we uncover several empirical patterns in bonus pay that are difficult to rationalize exclusively with incentive theories of bonus pay but that support an important risk sharing motive.

Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Item Type: Article
Language: English
Date: 2023
Refereed: Yes
Uncontrolled Keywords: banker compensation, risk sharing, bonus pay, operating leverage
JEL Classification: G20 - General
G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 29 Mar 2023 12:10
Last Modified: 04 Sep 2023 14:52
OAI Identifier: oai:tse-fr.eu:128010
URI: https://publications.ut-capitole.fr/id/eprint/47320
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