Bonus culture increases risk

BANKING executives are more likely to involve their banks in risky behaviour when they are personally compensated for doing so, according to research by Edinburgh University.

Banks whose chief executives receive substantial bonuses for completing acquisitions are more likely to carry out risky takeovers and mergers, according to the analysis of US bank acquisitions from 1993-2007.

Jens Hagendorff, senior lecturer at the Edinburgh University Business School, said: "Banking chief executives are clearly responsive to the risk-taking incentives they receive."