COMPENSATION OF THE CEO, BOARD OF DIRECTORS AND BANK RISK TAKING
COMPENSATION OF THE CEO, BOARD OF DIRECTORS AND BANK RISK TAKING

Summary/Abstract: This article aims to study the effects of the attributes of the Board of Directors and the remuneration of the leader in charge of risk-taking from thirty European commercial banks. This research uses a technique of static panel data over the period of 2004-2009. The results of our study suggest that the relationship between the remuneration of the leader and the risk of insolvency is statistically negative. Similarly, our results show that accumulating the functions of the CEO and the chairman of the board of directors negatively affects the risk of insolvency. They also indicate that there is a negative correlation between the frequency of the board directors' meetings and the insolvency risk. This study gives an overview about the fact that both the Board of Directors and the remuneration of the Chief Executive Officer (CEO) have an important and dominant role in controlling the leaders of the European commercial banks. Hence, the control manifested by the Board of Directors has been strengthened by the CEO's compensation which is considered a motivating mechanism of control for the CEO.

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