Deregulation and Board Policies: Evidence from Performance and Risk Exposure Measures Used in Bank CEO Turnover Decisions

Forthcoming in The Accounting Review

Forthcoming in The Accounting Review

54 Pages Posted: 11 Jan 2019 Last revised: 1 Sep 2022

See all articles by Rachel M. Hayes

Rachel M. Hayes

University of Utah - David Eccles School of Business

Xiaoli (Shaolee) Tian

Georgetown University - Department of Accounting and Business Law

Xue Wang

Ohio State University - Fisher College of Business

Date Written: May 11, 2022

Abstract

We examine the effects of banking deregulation on bank board policies—specifically, whether deregulation affects the performance and risk exposure measures used in bank CEO turnover decisions. Using the staggered adoption of interstate branching as our setting, we find that bank CEO turnover is more (less) sensitive to stock (accounting) performance after deregulation. We also find that deregulation is associated with a higher sensitivity of bank CEO turnover to the idiosyncratic component of tail risk. Moreover, such changes in turnover policies primarily exist in large banks and federally chartered banks, which are best positioned to exploit growth opportunities, and in banks that expand branch operations after deregulation. Our results indicate an increased emphasis on stock performance and tail risk in turnover decisions when growth opportunities are greater in the deregulated environment. The findings provide evidence that the information used in board decisions varies with features of the competitive environment.

Keywords: CEO Turnover, Deregulation, Growth

JEL Classification: G21, G30

Suggested Citation

Hayes, Rachel M. and Tian, Xiaoli (Shaolee) and Wang, Xue, Deregulation and Board Policies: Evidence from Performance and Risk Exposure Measures Used in Bank CEO Turnover Decisions (May 11, 2022). Forthcoming in The Accounting Review, Forthcoming in The Accounting Review, Available at SSRN: https://ssrn.com/abstract=3312243 or http://dx.doi.org/10.2139/ssrn.3312243

Rachel M. Hayes (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Xiaoli (Shaolee) Tian

Georgetown University - Department of Accounting and Business Law ( email )

McDonough School of Business
Washington, DC 20057
United States

Xue Wang

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-688-1330 (Phone)
614-292-2118 (Fax)

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