SUSTAINABLE COMPENSATION AND PERFORMANCE: AN EMPIRICAL ANALYSIS OF EUROPEAN BANKS | Zendy

Elisabetta D’Apolito | Zendy; Antonia Patrizia Iannuzzi | Zendy; Stefania Sylos Labini | Zendy; Edgardo Sica | Zendy

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SUSTAINABLE COMPENSATION AND PERFORMANCE: AN EMPIRICAL ANALYSIS OF EUROPEAN BANKS

Author(s) -

Elisabetta D’Apolito,

Antonia Patrizia Iannuzzi,

Stefania Sylos Labini,

Edgardo Sica

Publication year - 2019

Publication title -

journal of financial management markets and institutions

Language(s) - English

Resource type - Journals

ISSN - 2282-717X

DOI - 10.1142/s2282717x19400048

Subject(s) - remuneration , sustainability , endogeneity , executive compensation , business , panel data , compensation (psychology) , sample (material) , control (management) , accounting , finance , economics , corporate governance , econometrics , psychology , ecology , chemistry , management , chromatography , psychoanalysis , biology

This study investigates the financial and non-financial impacts of the use of sustainability criteria in banks’ executive compensation plans. The sample covers all the globally and systemically important European banks over the period 2013–2017. Panel data-fixed effect estimations are employed to mitigate endogeneity concerns and to control for within-firm dynamics. The implementation of sustainable criteria in the banks’ remuneration contracts was found to (i) negatively impact economic performance, (ii) negatively impact the riskiness profile, and (iii) positively impact sustainability performance. These findings have important implications for investors as well as banks. Indeed, these results are encouraging for the use of sustainability targets in executive compensation for restricting excessive risk-taking behaviors and improving sustainability performance.

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