This paper investigates whether greater competition increases or decreases individual bank and banking system risk. Using a new text‐based measure of competition, and an instrumental variables analysis that exploits exogenous variation in bank deregulation, we provide robust evidence that greater competition increases both individual bank risk and a bank's contribution to system‐wide risk. Specifically, we find that higher competition is associated with lower underwriting standards, less timely loan loss recognition, and a shift toward noninterest revenue. Further, we find that higher competition is associated with higher stand‐alone risk of individual banks, greater sensitivity of a bank's downside equity risk to system‐wide distress, and a greater contribution by individual banks to downside risk of the banking sector.

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Research Summary As firms mature, their founders are often replaced with seasoned executives. When founders are retained, the surrounding top management team (TMT) members are viewed as critical resources in helping compensate for the founder's managerial deficiencies. Surprisingly, however, little is known about how TMT members affect a founder‐led firm's performance later in a firm's life. Using novel methods and a sample of over 2,000 firms, we address this gap. We find that although team structure has a significant impact on the performance of nonfounder‐led firms (consistent with past literature), it has little to no effect on the operating performance of founder‐led firms, suggesting that founder chief executive officers (CEOs) may exert too much control. Thus, the irony is that founders are retained to propel progress but their very retention may prevent progress. Taken together, our findings add to the entrepreneurship, team, and research methods literatures. Managerial Summary Although founders have the entrepreneurial skills to successfully grow a startup, they generally lack the managerial skills required to lead a large, public firm. As a result, many founder CEOs are replaced before a firm goes public. When founders do stay as CEO, the prevailing belief is that they require a strong TMT to help compensate for the founder's managerial deficiencies. However, given founders' desire to retain control, there is a question of whether they will rely on that team, or if they will simply continue to follow their own intuition. We find evidence that founder CEOs are much less likely to listen to and benefit from their teams relative to nonfounder CEOs.

This paper examines the relation between cognitive perceptions of management and firm valuation. We develop a composite measure of investor perception using 30-second content-filtered video clips of initial public offering (IPO) roadshow presentations. We show that this measure, designed to capture viewers' overall perceptions of a CEO, is positively associated with pricing * at all stages of the IPO (proposed price, offer price, and end of first day of trading). The result is robust to controls for traditional determinants of firm value. We also show that firms with highly perceived management are more likely to be matched to high-quality underwriters. In further exploratory analyses, we find the impact is greater for firms with more uncertain language in their written S-1. Taken together, our results provide evidence that investors' instinctive perceptions of management are incorporated into their assessments of firm value. JEL codes: G12; G14; M12; M13; M41

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