The implications of TARP: Evidence from bank performance and CEO pension benefits

Watch out for bailout: TARP and bank earnings management

“…However, Berger and Roman (2015) find that TARP-participant banks receive competitive advantages and improve both their market shares and market power. Finally, Nwaeze, Xu, and Yin (2018) find that TARP-participant banks tend to substantially increase pension benefits for their CEOs to mitigate the TARP-caused reduce in conventional forms of compensation. Our study further documents the relation between TARP and bank accounting quality and finds an unintended negative impact of TARP on bank accounting quality.…”

“…Additionally, to prevent excessive risk-taking, participant banks were subject to restrictions on compensation for senior executives, including the CEO, the CFO and the next three most highly paid executive officers (Berger and Roman, 2015;Nwaeze, Xu, and Yin, 2018). Implemented on 14 th October 2008, the U.S. Treasury limited tax deductibility of compensation for senior executives to $500,000, required bonus clawbacks and reduced golden parachute payments.…”

“…Many scholars and regulators highlight that this wave could pose a profound impact on banks' following strategies and behaviors (Duchin and Sosyura, 2014). Thus, they have investigated the impact of the bailout on bank risk-taking (Berger, Bouwman, Kick, and Schaeck, 2016), performance (Ng, Vasvari, and Wittenberg-Moerman, 2016) and compensation structures of senior executives (Bayazitova and Shidasani, 2012;Nwaeze, Xu, and Yin, 2018).…”

CEO chairman controversy: evidence from the post financial crisis period

“…This dummy is defined as the existence of a BHC board-level risk committee, as reported in BoardEx. TARP This measures the amount of BHC TARP funding, following Carty and Weiss (2012) and Nwaeze et al (2018). TARP amounts were collected via https ://proje cts.propu blica .org/bailo ut/ following Shah et al (2017).…”

Stockholder Wealth Maximization during the Troubled Asset Relief Program Period: Is Executive Pay Harmful?

“…Surprisingly, Phillips (2010) also reported that some performance indicators were negatively related to CEO compensation, suggesting that earnings-related fundamentals are less able to explain the compensation practices of TARP recipients. While banks and business media expressed concerns that TARP would eliminate the best talents, Nwaeze et al (2018) showed that the TARP program improved bank performance by inducing CEO resignations as the TARP recipients enjoyed better performance after their CEOs exited. Their study also reports that TARP firms that experienced CEO resignation enjoyed higher returns in the year following their CEOs' exit, whereas other banks that provided pension benefits to compensate for the wealth-reduction effect of bank executives also enjoyed higher returns in the long run (Nwaeze et al 2018).…”