Abstract
Recent studies on CEO compensation, both theoretically and empirically have shown the inability to link the CEO pay with the firm’s performance. From the empirical work of Brewer III, Hunter and Jackson III (2004), the authors relate CEO compensation to the risk-taking factor of the U.S. banks. As such, recent studies on the Canadian executive compensation have shown that the rise in the top executives’ pay is not entirely related to the firm’s performance. Studies focusing on Canadian firms are available but only few studies are available on the Canadian banking firms. Focusing on the Big Six banks in Canada, this paper will evaluate the CEO compensation and its relationship with the bank risk-taking factor. Furthermore, this paper will find out if the moral hazard issue affecting the U.S. banks is relevant to the Canadian banks as well.
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