CEOs' Prior Professional Experiences and Bank Risk
Rebel Cole  1@  , Luis García-Feijóo  2@  , Esteban Hernandez  3@  
1 : Florida Atlantic University
2 : Florida Atlantic University  (FAU)
Boca Raton, FL -  United States
3 : Florida Atlantic University [Boca Raton]

We investigate if CEOs' early-career professional experiences influence bank financial policies. We track the employment history of 658 U.S. commercial bank CEOs from 1992 to 2022. We find higher liquidity and capital ratios, and lower leverage ratios at banks whose CEOs previously worked (in a non CEO role) at banks that experienced distress, compared to banks with CEOs without those career experiences. More recent negative experiences have a stronger influence, while positive experiences do not affect bank policies. Exposure to the S&L crisis has a separate and weaker effect on bank policies than more general negative professional experiences. An examination of exogenous bank CEO turnover confirms the results and indicate a causal effect. Overall, we find evidence of experience effects related to prior negative professional experiences in the banking industry.


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