Firm Performance and CEO Reputation Costs: New Evidence from Venezuelan Banking Crisis
Universidad de los Andes - School of Management
Instituto de Estudios Superiores de Administración (IESA)
Carlos A. Molina
May 1, 2007
Emerging Market Finance and Trade, Vol. 43, pp. 16-33, 2007
When searching for outside directors, the performance of the candidate as a manager of other firms is important. Using a sample of Venezuelan banks during a systemic crisis, we find that the outside directorships of chief executive officers (CEOs) are negatively affected by banks’ performances, measured by their default risk. Our results suggest that a CEOs’ personal monitoring talents are what is being purchased when CEOs are appointed as outside directors. In addition, the negative effect of firms’ performances on their CEOs’ reputations is significantly stronger in an emerging market, suggesting that CEO reputation helps to control for managerial agency costs when other governance mechanisms are absent. The size of the bank has a positive effect on CEO reputation, which partially offsets the negative reputation effect of the bank risk.
Number of Pages in PDF File: 19
Keywords: Banking Crisis, CEO Reputation, Performance
JEL Classification: G3, G39Accepted Paper Series
Date posted: February 8, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 3.469 seconds