Who Disciplines Bank Managers?

Andrea Maechler, Klaus Schaeck, Martin Cihak () and Stéphanie Marie Stolz

No 2009/272, IMF Working Papers from International Monetary Fund

Abstract: We bring to bear a hand-collected dataset of executive turnovers in U.S. banks to test the efficacy of market discipline in a 'laboratory setting' by analyzing banks that are less likely to be subject to government support. Specifically, we focus on a new face of market discipline: stakeholders' ability to fire an executive. Using conditional logit regressions to examine the roles of debtholders, shareholders, and regulators in removing executives, we present novel evidence that executives are more likely to be dismissed if their bank is risky, incurs losses, cuts dividends, has a high charter value, and holds high levels of subordinated debt. We only find limited evidence that forced turnovers improve bank performance.

Keywords: WP; bank risk; turnover bank; bank executive; risk return trade-off (search for similar items in EconPapers)
Pages: 45
Date: 2009-12-01
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Citations: View citations in EconPapers (23)

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Journal Article: Who Disciplines Bank Managers? (2011)
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