|
||||
|
||||
Bank CEO Incentives and the Credit Crisis
RĂ¼diger Fahlenbrach Swiss Federal Institute of Technology Lausanne; Ohio State University - Department of Finance Rene M. Stulz Ohio State University - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI) July 27, 2009 Charles A Dice Center Working Paper No. 2009-13 Fisher College of Business Working Paper No. 2009-03-13 Swiss Finance Institute Research Paper No. 09-27 ECGI - Finance Working Paper No. 256/2009 Abstract: We investigate whether bank performance during the credit crisis of 2008 is related to CEO incentives and share ownership before the crisis and whether CEOs reduced their equity stakes in their banks in anticipation of the crisis. There is no evidence that banks with CEOs whose incentives were better aligned with the interests of their shareholders performed better during the crisis and some evidence that these banks actually performed worse both in terms of stock returns and in terms of accounting return on equity. Further, option compensation did not have an adverse impact on bank performance during the crisis. Bank CEOs did not reduce their holdings of shares in anticipation of the crisis or during the crisis; further, there is no evidence that they hedged their equity exposure. Consequently, they suffered extremely large wealth losses as a result of the crisis.
Keywords: Financial crisis, CEO compensation, insider trading JEL Classifications: G01, G21, G32 Working Paper SeriesDate posted: July 28, 2009 ; Last revised: November 02, 2009Suggested CitationContact Information
|
|
|||||||||||||||||||||
© 2009 Social Science Electronic Publishing, Inc. All Rights Reserved. Terms of Use Privacy Policy
This page was served by apollo3 in 0.156 seconds.