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Executive compensation and bank’s stability: which role of the corruption control? An empirical evidence from OECD banks

Abstract

This study examines the relationship between executive compensation and banking stability by considering the moderating role of corruption control. This study uses a sample of panel data that includes 74 banks operating in 10 OECD countries during the period 2006–2016. Generalized Moments Method (GMM) regression was used to test the hypotheses. The empirical results show that executive compensation (both fixed and variable) positively affects bank stability. Additionally, effective corruption control moderates the impact of CEO's behavior on banking stability. This study contributes to the existing literature by constructing incentives for CEO and assessing their impact on banking stability, while reflecting the moderating effect of corruption control in the country. These findings are useful for financial regulatory establishments to implement anti-corruption measures in banking institutions, maintain banking stability, and ensure sustainable economic development.

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Sallemi, M., Ben Hamad, S. & Ould Daoud Ellili, N. Executive compensation and bank’s stability: which role of the corruption control? An empirical evidence from OECD banks. J Manag Gov (2022). https://doi.org/10.1007/s10997-022-09649-2

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Keywords

  • Executive compensation
  • Corruption Control Index
  • Banking stability
  • Moderator
  • Z-score
  • OECD

JEL Classification

  • C33
  • G21
  • G32
  • G34