臺大管理論叢 NTU Management Review VOL.29 NO.1

257 NTU Management Review Vol. 29 No. 1 Apr. 2019 wealth take risks that they view as judicious and profitable for shareholders, so their liquidity management policies are different from the policies implemented by CEOs at banks that have lower incentives. To investigate this relationship, we collected data from a sample of banks from WRDS Compustat Bank file and Call Report for the period 1992 to 2012. To measure CEO incentives, we collected data from ExecuComp and proxy statements for each bank in the sample. After data analysis, we found that CEOs’ compensation packages did not significantly change after the 2007 financial crisis. However, the dollar value of the annual stock grants significantly increased, but cash bonus and other compensation tended to decline for both S&P 1,500 banks and non-S&P 1,500 banks after the financial crisis. The CEOs equity portfolio was, on average, around eight times their annual compensation, but the ratio decreased after the financial crisis. The substantial decline in stock price significantly reduced the equity portfolio value, lowering the sensitivity of the CEO’s equity portfolio to changes in the bank’s stock price, and also reduced the risk exposure of the CEO’s equity portfolio after the financial crisis. Furthermore, univariate analyses showed that banks that were managed by CEOs who received larger cash bonuses tended to have higher liquidity ratios, while equity- based CEO incentives had different impacts on the bank liquidity holding policy for different types of banks. Banks within the S&P 1,500 that had high CEO equity incentives usually maintained greater bank liquidity, but banks not within the S&P 1,500 that had high CEO equity incentives maintained significantly lower liquidity ratios than banks with low CEO equity incentives. After determining that bank liquidity policies differ with CEO’s incentives, we further investigated whether CEO’s incentives were associated with bank risk attitude, which could influence bank policies. Previous studies suggested that CEO compensation schemes affect their risk taking attitudes on investment decisions (Coles, Daniel, and Naveen, 2006; DeYoung and Rice, 2004; Chen, Steiner, and Whyte, 2006). We further investigate if bank CEO incentives affect the business policy decisions and the liquidity holdings. Our analyses found evidence supporting this relationship. For example, banks managed by CEOs who received higher cash bonuses tended to make higher loan commitments, take more deposits, and operate in more non-interest earning business activities than banks with lower CEO cash bonuses. In addition, banks managed by CEOs who received higher equity dollar incentives tended to have higher loan commitments, take fewer deposits, and operate more non-interest earning activities.