Involuntary excess reserve and bankers’ remuneration: evidence from Chinese banks

Thai Vu Hong Nguyen, Agyenim Boateng, Thanh Cong Nguyen

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    Abstract

    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.
    Original languageEnglish
    Pages (from-to)518-522
    Number of pages5
    JournalApplied Economics Letters
    Volume25
    Issue number8
    Early online date16 Jun 2017
    DOIs
    Publication statusPublished - 2018

    Keywords

    • excess reserves
    • tail risk
    • Chinese banks
    • remuneration

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