Document Type

Article

Publication Date

1-2016

Department

Political Science, International Development, and International Affairs

Abstract

This article looks at the theory and empirical findings of excessive compensation on the recent financial implosion across institutional forms in banking. Compensation levels have gone up dramatically over the last 30 years as deregulation and concentration have grown. Some banks and quite a few credit unions avoided closure by prudent portfolio selection and keeping reserves up by maintaining compensation levels closer to the median level. Empirical findings here are based on a unique panel data set on U.S. commercial banks, thrifts, and credit unions from 1994 through 2010 (more than 300,000 observations) that provide evidence that the firms with the highest net worth typically are smaller institutions, are credit unions, have smaller insider loans as a percentage of assets, and have lower average pay levels. The favorable results here for credit unions, financial cooperatives, should help guide policy when deciding which type of financial institutions should be encouraged.

Comments

Available through a CC BY license. More information available from the publisher's website: https://doi.org/10.1177%2F2158244016630031

Publication Title

Sage Open

Volume

6

Issue

1

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