Do bank CEOs really increase risk in vega? Evidence from a dynamic panel GMM specification

Previous executive compensation studies find that firm risk increases in the risk-taking incentive (vega) of CEOs’ compensation packages. However, the standard methodology of two-stage least squares (2SLS) regression can suffer from invalid instruments. Using a dynamic panel generalized method of moments (GMM) specification to control for dynamic endogeneity, unobserved heterogeneity, and simultaneity (Wintoki, Linck, & Netter, 2012), we find no...