Performance-based compensation vs. guaranteed compensation: contractual incentives and performance in the Brazilian banking industry

Economia Aplicada

Klenio Barbosa²  André Bucione¹  André Portela Souza¹ 

[1] ,Sao Paulo School of Economics

关键词: Contract and Incentives;    Moral Hazard;    Retail Bank Industry;    Manager's Performance;    Panel Data Analysis;    Contratos e Incentivos;    Risco Moral;    Banco de Varejo;    Desempenho dos Gerentes;    Dados em Painel;    D23;    G3;    J3;   

DOI  :  10.1590/1413-8050/ea474

来源: SciELO

【 摘 要 】

Top management from retail banks must delegate authority to lower-level managers to operate branches and service centers. Doing so, they must navigate through conflicts of interest, asymmetric information and limited monitoring in designing compensation plans for such agents. Pursuant to this delegation, banks adopt a system of performance targets and incentives to align the interests of senior and unit managers. This paper evaluates the causal relationship between performance-based salaries and managers' effective performance. Using data from January 2007 to June 2009 of a large Brazilian retail banks, we find that that agents with guaranteed variable salary contracts have inferior performance compared with agents who have performance-based compensation packages. We conclude that there is a moral hazard in the behavior of agents who are subject to guaranteed variable salary contracts.

【 授权许可】

CC BY-NC   
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