Bank CEO materialism: Risk controls, culture and tail risk

Bushman, Robert M.; Davidson, Robert H.; Dey, Aiyesha; Smith, Abbie J.

doi:10.1016/j.jacceco.2017.11.014

Cited by 67 publications

(32 citation statements)

References 48 publications

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“…To ensure the robustness of our findings, we consider additional control variables that are likely to affect insiders' profitability. In particular, to the extent that CEOs drive corporate culture (Bushman, Davidson, Dey, & Smith, 2017) and carry out firm policies (Dyreng, Hanlon, & Maydew, 2008), it may be important to control for CEO characteristics. In particular, we control age, tenure, shareholdings and gender.…”

Section: Additional Analysesmentioning

confidence: 99%

Accounting conservatism and the profitability of corporate insiders

Khalilov

Osma

2020

Business Fin & Account

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We predict that accounting conservatism influences insiders' opportunities to speculate on good and bad news, and thus, insider trading profitability. We find that greater conditional (unconditional) conservatism is associated with lower (higher) insiders' profitability from sales. We find limited evidence that conservatism influences profitability from purchases. These findings are consistent with our hypotheses on the different informational roles of conditional and unconditional conservatism, and on the asymmetric influence of conservatism over the opportunities to speculate on good versus bad news. Our research design takes into consideration the endogenous nature of insiders' trading and conservatism. The results are robust to different measures of conservatism and a number of additional analyses. K E Y W O R D S conditional conservatism, insider trading sales and purchases, profitability from insider trading, unconditional conservatism J E L C L A S S I F I C AT I O N G30, M41

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Section: Additional Analysesmentioning

confidence: 99%

Accounting conservatism and the profitability of corporate insiders

Khalilov

Osma

2020

Business Fin & Account

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“…If liquidity allows raising agency costs (Attig et al, 2013;Bushman et al, 2018;Busta et al, 2014;Flannery, 1994;Jensen & Meckling, 1976;Myers & Rajan, 1998), then liquid assets provide accessible ways to reinvest in other assets when prices are low and reduce same investing risks by ensuring that an investor will be able to quickly react to market moves (Brunnermeier and Yogo, 2009). The intrinsic liquidity production has been extensively discussed by, among others, Diamond and Dybvig (1983), Diamond & Rajan (2001), Gorton & Pennacchi (1990), Holmström & Tirole (1998), Holmström & Tirole (1998) and Gorton & Winton (2017).…”

Section: Bank Characteristics Liquidity and Bank Valuationmentioning

confidence: 99%

“…Finally, we also consider two agency cost variables (Archer et al, 1998), such as the dividend pay-out, measured as common stock dividends plus preferred stock dividends over net income and the risk-taking behaviour, where the total risk is the average annual standard deviation of daily stock returns (Minton et al, 2014). While the dividend policy affects the levels of regulatory capital with consequences also in term of liquidity (Gropp & Heider, 2010), the risk-taking behaviour directly affects the level of risk exposure, including the liquidity risk, of a bank (Bushman et al, 2018).…”

Section: Models For Cross-sectional Analysesmentioning

confidence: 99%

Investors’ expectations around quantitative easing: does liquidity injection affect European banks equally?

2021

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The role of liquidity in the banking industry is increasingly under the spotlight since the Global Financial Crisis (GFC) in 2007. Prior evidence offers contrasting findings on the role played by liquidity in banks: whilst it ensures systemic financial stability, at the same time it raises agency costs. Notwithstanding this, European banks benefited from a generous liquidity injection following the launch of the Quantitative Easing (QE) programme by the European Central Bank (ECB) in 2015–2016. We leverage on the release of the QE and investigate whether investors’ reactions to the announcements of new liquidity injections vary according to bank-level characteristics of the European banks: namely, their financial soundness, asset portfolio quality and the level of transparency. Our findings document an overall negative market reaction to the QE announcements; at a more fine-grained level of analysis we highlight that banks falling short of the regulatory requirements are not expected to benefit from additional liquidity. This study contributes to the literature on the role of liquidity in banks by showing important boundary conditions to the beneficial role of liquidity in banks, that is—because of the regulatory capital requirements—liquidity is only valuable to investors if it can be reinvested once constraints are overcome.

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“…All data collected via BoardEx unless otherwise noted. CRO centrality CRO Centrality is defined as the ratio of the CRO's total compensation, excluding stock and options, to the CEO's total compensation, following Ellul and Yerramilli (2013); Keys et al (2009) and Bushman et al (2018). CRO and CEO total compensation is collected using Morningstar.…”

Section: Ceo Ownershipmentioning

confidence: 99%

CEO chairman controversy: evidence from the post financial crisis period

Gontarek

Belghitar

2020

Rev Quant Finan Acc

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Regulators generally discourage bank CEOs also holding the role of board Chairman, as this governance structure can hinder independent decision-making and effective risk oversight. This study examines the issue of CEO Duality, identifying a positive relation to greater risk-taking across a battery of sensitivity tests. In further analysis, the study controls for differences in supervisory monitoring levels to examine its impact. Banks led by CEO Chairmen which are subject to lower levels of supervision continue to report a robust association to risk-taking, as before. However, this association dissipates for banks which are subject to heightened supervisory monitoring. These findings indicate that agency costs related to Duality may be moderated by greater regulation. This paper weighs-in on the controversy relating to a single contentious governance structure (i.e., CEO Duality), thus informing boards, regulators and researchers of the need to consider the overall interplay of monitoring mechanisms.

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Bank CEO materialism: Risk controls, culture and tail risk

Cited by 67 publications

References 48 publications

Accounting conservatism and the profitability of corporate insiders

Accounting conservatism and the profitability of corporate insiders

Investors’ expectations around quantitative easing: does liquidity injection affect European banks equally?

CEO chairman controversy: evidence from the post financial crisis period

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