Tax Provisions For Executive Compensation And Their Effects On Corporate Incentive Structures Following The Enactment Of The Troubled Asset Relief Program

Abstract

I examine how executive compensation of major banking firms has changed in response to the Emergency Economic Stabilization Act and the corresponding legislation that brought about the Troubled Asset Relief Program following the banking crisis in the United States of America in 2008. Using a sample of ten firms over three two-year periods from 2006-2011, I found that firms showed decreases while subject the TARP limitations and subsequently showed increasing trends following their repayment of the TARP funds. The data suggests that this increasing trend will continue on if the extrapolated, thus proving the limitations of TARP ineffective in restraining excessive executive compensation. However, the findings also support the idea that executive compensation culture among these banks has changed to focus on firm performance since the enactment of TARP.