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

263 NTU Management Review Vol. 29 No. 1 Apr. 2019 Needless to say, CEO incentives have long been emphasized as crucial elements of firm success. Fama and Miller (1972) highlighted the importance of CEO compensation in firms’ investment decisions. Good compensation designs may align the interests of CEOs with those of shareholders, which leads to value-maximizing decisions for shareholders (Bizjak, Brickley, and Coles, 1993; Datta, Iskandar-Datta, and Raman, 2001; Lai and Wu, 2016). Studies have found that the financial industry has relatively highly compensated individuals compared to non-financial industries (Kaplan and Rauh, 2009) and pay-for- performance sensitivity of CEO pay at banks increased because of the increase in industry compensation after deregulation (Hubbard and Palia, 1995; Crawford, Ezzell, and Miles, 1995). According to Fahlenbrach and Stulz (2011), poorly designed CEO incentives were seen as one of the critical causes of financial crises by practitioners and policy-makers (Blinder, 2009; Solomon and Paletta, 2009; Cho, Goldfarb, and Tse, 2009). Although their results were inconclusive, their study did indicate that CEOs with better incentives were more willing to take risks that looked profitable ex ante, but had unexpectedly poor outcomes ex post. In the same vein as Fahlenbrach and Stulz (2011), we wonder whether CEO incentives affect bank liquidity management. Therefore, we hypothesize that CEOs with better incentives to maximize shareholder wealth take risks that they view as judicious or profitable to shareholders, so their liquidity management is different from banks with inferior CEO incentives. Furthermore, most banking studies have focused on listed banks. They have seldom addressed the differences in managerial incentives and liquidity policies between listed banks and non-listed banks. We propose that the external scrutiny or supervision from government agents, stock analysts, and media coverage for S&P 1,500 banks is much higher than that for non-S&P 1,500 banks. If there is an association between managerial incentives and bank liquidity, the observed linkage for different types of banks may be different. Therefore, we divided our sample into S&P 1,500 banks (which are listed banks included in the S&P 1,500 index) and non-S&P 1,500 banks (which are banks not included in the S&P 1,500 index). 3. Methodology This section describes the data sources, variables, and research design.