Political Ideology and CEO Performance Under Crisis

Abstract

Management quality is known to influence depository institution performance, but less understood are the characteristics of managers that influence performance. We empirically examine how the political ideology of a credit union’s CEO influenced decision making and performance during the financial crisis. Our results indicate that the return on assets of credit unions run by conservative CEOs are 22 basis points lower during the crisis relative to liberal CEOs. Returns are shown to be lower as a direct result of credit unions with conservative CEOs applying more conservative accounting practices for loan losses than their counterparts during the crisis, despite similar loan quality

Keywords: Credit unions, accounting practices, performance, conservatism, financial crisis

JEL Classification: G21, G28