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

321 NTU Management Review Vol. 29 No. 1 Apr. 2019 Appendix. Summary of Research Variables Used in the Study We collected data from ExecuComp database and hand collected data from proxy statements to measure the CEO incentives of the sample banks. Financial data from the sample banks was from Compustat Bank database, or “Call Report.” Business cycle data was from the Federal Reserve Board of Governors. Variables Definitions Panel A: Variables of Interest CEO Incentives We followed Fahlenbrach and Stulz (2011) and measured the CEO incentives in five different categories: (1) CEO short-term incentive was gauged by the ratio of cash bonus to cash salary; (2) equity incentives ($) was measured by dollar gains of CEO portfolio from 1% change in stock price; specifically, it equals to the dollar change in the executive’s stock and option portfolio value for a 1% change in the stock price; (3) equity incentive (%) was measured by percentage shares owned by CEO; (4) equity risk exposure ($) was equal to the dollar change in the CEO’s equity portfolio value for a 1% change in stock volatility; and (5) equity risk exposure (%) was defined as the percentage change in the equity portfolio value for a 1% increase in stock volatility and was calculated from all option series held by the CEO. Bank Liquidity Ratio Bank liquidity asset divided by total assets. Specifically, bank liquidity asset was the sum of Fed funds sold and securities purchased under agreement to resell, securities held to maturity, and securities available for sale. Bank Return on Asset The ratio of EBIT to total bank asset. Bank Return on Equity The ratio of EBIT to total bank equity. Panel B: Variables of Bank Characteristics Loan Commitment The ratio of unused loan commitments to commitments plus loans. Loans The ratio of total loans to total assets. Deposit Base The ratio of transactions deposits to total deposits. Bank Size Natural log of gross total asset, where gross total asset equals total assets plus the allowance for loan and lease losses and the allocated transfer risk reserve. Bank Capital The ratio of total equity capital to total bank asset. Share of Deposit Financing The ratio of total deposits to total assets. Cost of Deposit The ratio of net interests paid to total deposits. Non-interest income ratio The ratio of non-interest income to net income. Bank Insolvency Risk Bank z-score was used to proxy for bank insolvency risk. Specifically, it was calculated by the return on assets plus the capital asset ratio divided by the standard deviation of asset returns. The standard deviation of asset returns was computed by using the asset returns from previous five years. A higher z-score indicates greater bank stability. Panel C: Variable Proxy for Market Conditions Business Cycle The GDP growth rate was used as a proxy for the business cycle.