Bank CEO Incentives and the Credit Crisis / Rüdiger Fahlenbrach, René M. Stulz.

Format:

Book

Author/Creator:

Fahlenbrach, Rüdiger.

Contributor:

National Bureau of Economic Research.

Stulz, René M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15212.

NBER working paper series no. w15212

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

We investigate whether bank performance during the credit crisis of 2008 is related to CEO incentives and share ownership before the crisis and whether CEOs reduced their equity stakes in their banks in anticipation of the crisis. There is no evidence that banks with CEOs whose incentives were better aligned with the interests of their shareholders performed better during the crisis and some evidence that these banks actually performed worse both in terms of stock returns and in terms of accounting return on equity. Further, option compensation did not have an adverse impact on bank performance during the crisis. Bank CEOs did not reduce their holdings of shares in anticipation of the crisis or during the crisis; further, there is no evidence that they hedged their equity exposure. Consequently, they suffered extremely large wealth losses as a result of the crisis.

Notes:

Print version record

August 2009.