Bank Stress Testing, Human Capital Investment and Risk Management

61 Pages Posted: 13 Jan 2023

See all articles by Thomas Schneider

Thomas Schneider

University of Oklahoma - Division of Finance

Philip E. Strahan

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Jun Yang

University of Notre Dame

Multiple version iconThere are 2 versions of this paper

Date Written: July 01, 2024

Abstract

This paper studies banks' investment in risk management practices following the Global Financial Crisis and the advent of stress testing. Our results suggest that 'Too Big to Fail' distortions weaken large banks' incentive to invest in risk management human capital. Stress testing spurs demand for highly skilled quantitative risk managers, but only narrowly in anticipation of a test and following poor performance on a test. Moreover, stress testing does not affect demand for risk management jobs not specifically linked to passing the tests, and recent changes to the tests could further erode their efficacy.

Keywords: Stress Testing, Human Capital Investment, Risk Management

JEL Classification: G20, G28, J23, J24

Suggested Citation

Schneider, Thomas and Strahan, Philip E. and Yang, Jun, Bank Stress Testing, Human Capital Investment and Risk Management (July 01, 2024). Available at SSRN: https://ssrn.com/abstract=4323886 or http://dx.doi.org/10.2139/ssrn.4323886

Thomas Schneider

University of Oklahoma - Division of Finance ( email )

Norman, OK 73019
United States

Philip E. Strahan

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-6430 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://www2.bc.edu/~strahan

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jun Yang (Contact Author)

University of Notre Dame ( email )

Notre Dame, IN
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
199
Abstract Views
763
Rank
293,934
PlumX Metrics