Bank CEO careers after bailouts: The effects of management turnover on bank risk

47 Pages Posted: 18 May 2018 Last revised: 10 Oct 2022

See all articles by Pramuan Bunkanwanicha

Pramuan Bunkanwanicha

ESCP Business School

Alberta Di Giuli

ESCP; European Corporate Governance Institute (ECGI)

Federica Salvadè

PSB Paris School of Business

Date Written: April 26, 2019

Abstract

We study whether bank bailouts affect CEO turnover and its subsequent impact on bank risk. Exploiting the Troubled Asset Relief Program (TARP) of 2008, we find that TARP funds temporarily decreased the likelihood of bank CEO turnover during the crisis (2008-2010) but significantly increased CEO changes afterwards. Our results show that replacing TARP CEOs reduced individual bank risk as well as the bank’s contributions to the systemic risk. Finally, we find that TARP CEO turnover was mainly driven by a decrease in the bank’s political capital. Overall we provide evidence that bank bailouts have important implications for banks’ risk-taking and systemic risk, insofar as bailouts affect bank CEO turnover.

Keywords: CEO Career, CEO Turnover, TARP, Risk, Bail-Out

JEL Classification: G34, G2, G28

Suggested Citation

Bunkanwanicha, Pramuan and Di Giuli, Alberta and Salvadè, Federica, Bank CEO careers after bailouts: The effects of management turnover on bank risk (April 26, 2019). Available at SSRN: https://ssrn.com/abstract=3173545 or http://dx.doi.org/10.2139/ssrn.3173545

Pramuan Bunkanwanicha

ESCP Business School ( email )

79 Avenue de la Republique
Paris, 75011
France

Alberta Di Giuli (Contact Author)

ESCP ( email )

Paris Campus
79, Avenue de la Republique
Paris, 75011
France

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Federica Salvadè

PSB Paris School of Business ( email )

59 rue Nationale
Paris, 75013
France

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