The Impact of Pay Transparency on Bank Compensation, Employment, Performance and Opacity

Résumé

How does pay transparency affect bank opacity? We answer this question by studying the impact of the introduction of pay transparency laws across nine U.S. states with both advert-, individual- and bank-level data. We find that after the introduction: (1) more adverts include pay information; (2) bank employees, especially loan officers, leave for non-banks as wages are higher there; and (3) banks respond to these departures by increasing their own employee compensation. The departures of experienced employees and catch-up in wages precede more bank risk-taking and lower bank loan performance, and dispersion in loan loss provisioning!

Mots-clés

Codes JEL