TY  - JOUR
AU  - Hubbard,R. Glenn
AU  - Palia,Darius
TI  - Executive Pay and Performance: Evidence from the U.S. Banking Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4704
PY  - 1995
Y2  - October 1995
UR  - http://www.nber.org/papers/w4704
L1  - http://www.nber.org/papers/w4704.pdf
N1  - Author contact info:
R. Glenn Hubbard
Graduate School of Business
Columbia University, 101 Uris Hall
3022 Broadway
New York, NY  10027
Tel: 212/854-3493
Fax: 212/864-6184
E-Mail: rgh1@columbia.edu, ws2187@columbia.edu

Darius Palia
Thomas A. Renyi Chair in Banking
Department of Finance & Economics
Rutgers Business School
Room 1142, 1 Washington Park
Newark, NJ 07102
Tel: 973/353-5981
Fax: 973/353-1233
E-Mail: dpalia@rci.rutgers.edu
AB  - This paper examines an effect of deregulating the market for corporate control on CEO compensation in the banking industry.  Given that each state's banking regulation defines the competitiveness of its corporate control market, we examine the effect of a state's interstate banking regulation on the level and structure of bank CEO compensation.  Using panel data on 147 banks over the decade of the 1980s, we find evidence supporting the hypothesis that competitive corporate control markets (i.e., where interstate banking is permitted) require talented managers whose levels of compensation are higher.  We also find that the compensation-performance relationship is stronger than for managers in markets where interstate banking is not permitted.  Further, CEO turnover increases substantially after deregulation, as does the proportion in performance-related compensation.  These results suggest strong evidence of a managerial talent market -- that is, one which matches the level and structure of compensation with the competitiveness of the banking environment.
ER  -