Who Disciplines Bank Managers?

46 Pages Posted: 5 Jan 2010

See all articles by Martin Čihák

Martin Čihák

International Monetary Fund (IMF)

Andrea Michaela Maechler

International Monetary Fund (IMF)

Klaus Schaeck

University of Bristol

Stéphanie Marie Stolz

affiliation not provided to SSRN

Multiple version iconThere are 3 versions of this paper

Date Written: December 2009

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: Bank soundness, Bank supervision, Banks, Capital markets, Corporate governance, Data analysis, Economic models, Performance indicators, Personnel, Risk management, United States

Suggested Citation

Cihak, Martin and Maechler, Andrea Michaela and Schaeck, Klaus and Stolz, Stéphanie Marie, Who Disciplines Bank Managers? (December 2009). IMF Working Papers, Vol. , pp. 1-45, 2009. Available at SSRN: https://ssrn.com/abstract=1531505

Martin Cihak

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

Andrea Michaela Maechler (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Klaus Schaeck

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

Stéphanie Marie Stolz

affiliation not provided to SSRN

No Address Available

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