Matthias Efing, HEC Paris

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Mat­thias Ef­ing from HEC Paris to present his re­search pa­per.
Per­sonal Webpage

Pa­per

Risk Man­agers in Banks

How do banks remu­ner­ate risk man­agers? Study­ing 127 banks dur­ing the years 2003 to 2007, we show that the per­form­ance pay of risk man­agers is pos­it­ively aligned with the per­form­ance pay of traders and loan of­ficers. A risk man­ager re­ceives a 13.6 to 33.5 Cents higher bo­nus when the aver­age bo­nus paid in front of­fices in­creases by one Euro. Labor mar­kets or risk-shar­ing among em­ploy­ees do not fully ex­plain this find­ing. Risk man­agers whose remu­ner­a­tion is strongly aligned with per­form­ance pay in front of­fices work for banks that did bet­ter in the crisis of 2008-2009. These find­ings are con­sist­ent with pre­dic­tions de­rived from a model of ef­fi­cient risk man­ager com­pens­a­tion.