This paper analyses the effects of involuntary excess reserves on bankers’ remuneration and the penalty associated with bank risk-taking if discovered. The study finds that involuntary excess reserves help conceal tail risks, improves bankers’ performance and remuneration. However, the risks once discovered result in heavy penalties on bankers’ remuneration. The study extends the agency theory to the context where banks hold large involuntary excess reserves.
- excess reserves
- tail risk
- Chinese banks
Nguyen, T. V. H., Boateng, A., & Nguyen, T. C. (2018). Involuntary excess reserve and bankers’ remuneration: evidence from Chinese banks. Applied Economics Letters, 25(8), 518-522. https://doi.org/10.1080/13504851.2017.1340568