The Wolves of Wall Street: Managerial Attributes and Bank Business Models
58 Pages Posted: 8 Oct 2015 Last revised: 30 Aug 2018
Date Written: August 17, 2018
We show that compensation and other manager characteristics that attract public scrutiny in the banking industry only describe a small amount of the heterogeneity in the business models of banks. Instead, idiosyncratic manager effects that cannot be explained by observable manager characteristics explain substantial differences in bank policies and risk. Therefore, most of the variation in the idiosyncratic effects that managers exert on banks is rooted in manager characteristics whose economic origins are unobservable. This implies attempts to rein in bank risk-taking by targeting manager-specific characteristics will be extremely challenging.
Keywords: Banks, managerial style, corporate governance, risk
JEL Classification: G21, G32, G34
Suggested Citation: Suggested Citation