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Post-GFC remuneration in the Australian banking industry: the impact of remuneration guidance on the alignment between pay-performance sensitivity and prudent risk-taking

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posted on 28.03.2022, 18:36 authored by Cheok Man Ng
This study investigates empirically the relation between remuneration and performance for the CEO and top 5 highest paid executives in Australian banks in the pre- and post-GFC periods. Pay-performance sensitivity is influenced by remuneration policy, and is based on agency theory. In the post GFC period, financial firms were pressured internationally to redesign managerial remuneration in the face of many studies pointing at poor remuneration practices in the financial sector as a cause of the GFC. Australia's implementation of a remuneration guideline (Prudential Practice Guide: PPG 511 - Remuneration) in 2009 was designed to align pay-performance sensitivity with prudent risk-taking through properly structured remuneration. This study makes an original contribution by evaluating the impact of implementing Remuneration Guidelines in the Australian banking sector. Using a 13-year sample covering all Australian banks listed in the Australian Securities Exchange (ASX) between 2003 and 2015, the results show that bank CEO remuneration became aligned with risk-taking in the post-guideline period. The absence of such an alignment in the pre-guideline period may suggest that the introduction of the remuneration guidelines had an impact on practice. I also find that a strong interest alignment between top executives and shareholders remains in the post-guideline period in the Australian banking industry.

History

Table of Contents

Chapter 1. Introduction -- Chapter 2. :Literature and background -- Chapter 3. Data & methodology -- Chapter 4. Results -- Chapter 5. Conclusion -- List of references.

Notes

Empirical thesis. Bibliography: pages 120-129

Awarding Institution

Macquarie University

Degree Type

Thesis MRes

Degree

MRes, Macquarie University, Faculty of Business and Economics, Department of Applied Finance and Actuarial Studies

Department, Centre or School

Department of Applied Finance and Actuarial Studies

Year of Award

2016

Principal Supervisor

Sue Wright

Additional Supervisor 1

Shane Magee

Rights

Copyright Cheok Man Ng 2016. Copyright disclaimer: http://mq.edu.au/library/copyright

Language

English

Jurisdiction

Australia

Extent

1 online resource (129 pages) graphs, tables

Former Identifiers

mq:69633 http://hdl.handle.net/1959.14/1256285