On the compensation implications of commercial bank entry into investment banking

We provide evidence regarding the extent to which commercial banking organizations that have entered investment banking have adopted pay-performance compensation systems that are like those used by investment banks. We find that pay-performance sensitivities for these banks once they begin securities underwriting are very similar to the sensitivities for commercial banks that have chosen not to enter investment banking. We also find that pay-performance sensitivities for both types of commercial banks are less than for investment banks.