Controlling bankers' bonuses: Efficient regulation or politics of envy?

Kent Matthews, Owen Matthews

Research output: Journal PublicationArticlepeer-review

2 Citations (Scopus)


The positive relationship between bank CEO compensation and risk-taking is a well-established empirical fact. The global banking crisis has resulted in a chorus of demands to control bankers' bonuses and thereby curtail their risk-taking activities in the hope that the world can avoid a repeat in the future. However, the positive relationship is not a causative one. In this paper we argue that an implicit too-big-to-fail policy provides the incentive for banks to take excessive risks and design compensation packages to deliver high returns. A credible no-bailout policy will have a better chance of curbing excess risk-taking than controlling bankers' compensation.

Original languageEnglish
Pages (from-to)71-76
Number of pages6
JournalEconomic Affairs
Issue number1
Publication statusPublished - Mar 2010
Externally publishedYes


  • Bankers' bonuses
  • No-bailout policy
  • Risk-taking
  • Too-big-to-fail

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Aerospace Engineering


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