Homework answers / question archive / If the Chief Executive Officer (CEO) of a financial institution finds ways to increase the asset-capital leverage of the institution during the boom years, how can we use the relationship between the return on assets, the return on capital and the asset-capital leverage for banks and financial institutions to explain how this would affect the share price and hence the shareholders' return? If the CEO's bonus is linked with the institution's profit in that year, how would this affect the CEO's bonus? How would this affect the risk of the financial institution in the long run?    

If the Chief Executive Officer (CEO) of a financial institution finds ways to increase the asset-capital leverage of the institution during the boom years, how can we use the relationship between the return on assets, the return on capital and the asset-capital leverage for banks and financial institutions to explain how this would affect the share price and hence the shareholders' return? If the CEO's bonus is linked with the institution's profit in that year, how would this affect the CEO's bonus? How would this affect the risk of the financial institution in the long run?    

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If the Chief Executive Officer (CEO) of a financial institution finds ways to increase the asset-capital leverage of the institution during the boom years, how can we use the relationship between the return on assets, the return on capital and the asset-capital leverage for banks and financial institutions to explain how this would affect the share price and hence the shareholders' return?


If the CEO's bonus is linked with the institution's profit in that year, how would this affect the CEO's bonus? How would this affect the risk of the financial institution in the long run?