Regulation of Compensation and Systemic Risk: Evidence from the UK

Kleymenova, A and Tuna, I (2021) Regulation of Compensation and Systemic Risk: Evidence from the UK. Journal of Accounting Research, 59 (3). pp. 1123-1175. ISSN 0021-8456 OPEN ACCESS


This paper studies the consequences of regulating executive compensation at financial institutions by examining the introduction of the UK Remuneration Code in 2010, which aimed to change the decision‐making horizon and risk‐taking incentives of bank executives. We find that, although both banks and non‐banks show increased contribution and sensitivity to systemic risk in the UK post‐2010, this increase is lower for UK banks, in line with the intent of the regulation. However, UK banks also experience higher unforced CEO turnover when compared to other UK firms. Therefore, while the regulation may have had the desired effect on systemic risk, it may also have given rise to some unintended consequences.

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Item Type: Article
Subject Areas: Accounting
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© 2021 Wiley
This is the peer reviewed version of the following article: Kleymenova, A. and Tuna, I. (2021), 'Regulation of Compensation and Systemic Risk: Evidence from the UK'. Journal of Accounting Research, which has been published in final form at https://10.1111/1475-679X.12355. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions

Funder Name: European Research Council
Date Deposited: 11 Mar 2021 15:38
Date of first compliant deposit: 11 Mar 2021
Subjects: United Kingdom
Executive recruitment
Pay incentives
Government economic controls and regulations
Last Modified: 17 Apr 2024 00:43
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