The wolves of Wall Street? Managerial attributes and bank risk |
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| Institution: | 1. University of Edinburgh, 29 Buccleuch Place, EH8 9JS Edinburgh, United Kingdom;2. New York University Stern School of Business, 44 West 4th Street, Room 9-91, NY 10012, United States;3. Frankfurt School of Finance & Management, Adickesallee 32-34, 60322 Frankfurt, Germany;4. Durham University Business School, University of Durham, Millhill Lane, DH1 3LB Durham, United Kingdom;1. Bank of Canada, 234 Wellington St, Ottawa, ON K1A 0G9, Canada;2. Centre for Economic Policy Research, London, United Kingdom;1. ALBA Graduate Business School, The American College of Greece, 6-8 Xenias Str, 11528 Athens, Greece;2. Bank of Greece, 21 E. Venizelos Ave., 10250 Athens, Greece;3. University of Piraeus, Department of Banking and Financial Management, 80 Karaoli & Dimitriou str., 18534 Piraeus, Greece;4. Surrey Business School, University of Surrey, Guildford, Surrey, GU2 7XH, United Kingdom;1. Banco de Portugal, Economics and Research Department, Av, Almirante Reis 71, 1150-015 Lisbon, Portugal;1. Department of Finance, University of Illinois Urbana-Champaign, United States;2. Department of Finance, Erasmus University Rotterdam, Netherlands;1. D’Amore-McKim School of Business, Northeastern University, USA;2. Olin Business School, Washington University in St. Louis, USA |
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| Abstract: | We find that chief executive officers and chief financial officers exert significant individual effects on bank risk. Manager transitions, including transitions generated by plausibly exogenous manager departures, lead to abnormally large changes in bank risk. We demonstrate that the effects of managers on bank risk are sizable and manager-specific. The effects are also partly anticipated by the board because they are reflected in managers’ pay. However, wide-ranging personal attributes, including biographical, experience, and compensation data, only explain a small share of managers’ impact on bank risk. This implies that attempts to rein in bank risk-taking by targeting manager characteristics will be challenging for investors and regulators. |
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| Keywords: | CEO CFO |
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