Déjà Vu: The Effect of Executives and Directors With Prior Banking Crisis Experience on Bank Outcomes Around the Global Financial Crisis

58 Pages Posted: 16 Jun 2018 Last revised: 20 Jun 2019

See all articles by Anwer S. Ahmed

Anwer S. Ahmed

Texas A&M University - Mays Business School

Brant E. Christensen

University of Oklahoma

Adam J. Olson

University of Cincinnati - Department of Accounting

Christopher G. Yust

Texas A&M University

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2018

Abstract

We investigate the effect of executives and directors with prior banking crisis experience on bank outcomes around the global financial crisis (GFC). Executives and directors with previous experience leading banks through a bank crisis may have been uniquely able to understand the risks, recognize the warnings signs early, and thus more effectively respond to the GFC. Controlling for other executive, director, and bank-level characteristics, we examine whether bank performance, risk taking, and accounting quality in the period immediately before and during the GFC are affected by having executives or directors who previously served as bank executives or directors during the 1980s/1990s banking crisis (80s/90s crisis). Overall, we find that banks led by these crisis-experienced executives and directors exhibit stronger performance, lower risk taking, and higher accounting quality in the period around the GFC. These effects are strongest among bank leaders for whom the 80s/90s crisis was most salient. Results are robust to propensity matched samples and other analyses performed to rule out alternative explanations. Our results suggest these individuals were able to learn from prior crisis experience.

Keywords: Governance, Banking, Learning, Financial Crisis, Bank Performance, Bank Risk-Taking, Bank Financial Reporting Quality

JEL Classification: G01, G20, G21, G32, M41, M48, N22

Suggested Citation

Ahmed, Anwer S. and Christensen, Brant E. and Olson, Adam J. and Yust, Christopher G., Déjà Vu: The Effect of Executives and Directors With Prior Banking Crisis Experience on Bank Outcomes Around the Global Financial Crisis (June 1, 2018). Contemporary Accounting Research, Vol. 36 (2), pp. 658-998, Summer 2019. Available at SSRN: https://ssrn.com/abstract=3188236 or http://dx.doi.org/10.2139/ssrn.3188236

Anwer S. Ahmed

Texas A&M University - Mays Business School ( email )

430 Wehner
College Station, TX 77843-4353
United States

Brant E. Christensen

University of Oklahoma ( email )

Norman, OK 73019-4004
United States

Adam J. Olson

University of Cincinnati - Department of Accounting ( email )

Cincinnati, OH 45221-0211
United States

Christopher G. Yust (Contact Author)

Texas A&M University ( email )

430 Wehner
College Station, TX 77843-4353
United States
979.845.3439 (Phone)

HOME PAGE: http://www.christopheryust.com

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