Bank CEOs Research Articles

Independent legal directors’ attitudes toward bank CEO stock option awards

Independent legal directors’ attitudes toward bank CEO stock option awards

Deutsche Bank Restart: Goodbye Goldman Sachs of Europe?

This public-sourced case describes the latest restructuring efforts by Deutsche Bank (DB) and gives a short history of prior restructuring efforts from the decade before. In July 2019, Christian Sewing, the new CEO of DB, announced a series of measures that included, among others, the elimination of global equity trading, the layoff of 18,000 employees, the creation of a “bad bank” to transfer noncore assets, and the suspension of dividends until 2022. The case describes key decisions a bank CEO makes when a bank needs to change course to return to profitability and growth. The case offers an opportunity to debate these key decisions, as well as discuss some of the prior ones during earlier restructuring efforts, and put the students in the CEO's shoes: What would you do and why? The case also describes key banking performance metrics (e.g., ROE, ROA) and other critical variables such as those reflecting capital health (Tier 1 ratio), as well as gives an overview of the bank business model and factors impacting bank profitability and value.

Lenders’ culture and the pricing of public corruption in corporate loans: evidence from the United States

We investigate how the cultural heritage of bank CEOs shapes the relationship between public corruption and the cost of syndicated loans in the US market. We show that banks led by CEOs that trace their origin in high uncertainty avoidance societies penalize less sharply in loan pricing the presence of high local public corruption in the state of the borrowing firms. We find some similar evidence for banks led by CEOs that trace their origin to more individualistic societies. These findings are consistent with the view that certain cultural traits prompt tolerance for the risks of corruption and show that the pricing of institutional quality in corporate loans is conditional on banks led by CEOs with such traits.

How do employees in the Polish financial sector react to automation in their workplace?

Abstract Banks and other financial institutions are at the forefront of digital transformation, driven by artificial intelligence technologies and accelerated by the COVID-19 pandemic. This study aims to better understand automation within Poland’s financial sector by identifying factors that influence automation levels and future expectations and by examining how the pace of automation changed during the pandemic. We analyzed data from 172 questionnaires collected from employees in the Polish financial sector in October and November 2020, along with insights on digitization from prior interviews with bank CEOs and managers. Our findings show that age, education, and firm characteristics relate to automation experience and that this experience influences employees’ views on future automation. Hence, it emphasizes the importance of demographic factors, workplace environment, and technological infrastructure in shaping experiences and expectations of automation, preparing the groundwork for future policies to manage the evolving work landscape amid technological advancements. The study improves our understanding of employees’ attitudes toward digital transformation and helps tackle the organizational roots of technological unemployment.

The role of inside debt in banks’ M&A choices: wealth expropriation or conflict resolution?

PurposeThis study investigates the impact of bank CEOs’ inside debt on shareholder benefits in the context of bank mergers and acquisitions (M&A) before the 2008–2009 financial crisis.Design/methodology/approachEmploying an event-study methodology, this analysis delves into market reactions to bank M&A announcements during 2006–2007, encompassing 105 M&As by 79 public commercial banks. This era witnessed heightened risk-taking behavior on the verge of the financial crisis. We explore the relation between relative inside debt and market abnormal returns at M&A announcements and the association between relative inside debt and cash payment preferences in M&As.FindingsEvidence suggests that M&A announcements from banks where acquiring CEOs hold a substantial inside debt experience favorable stock market reaction, particularly for smaller banks. Additionally, banks with elevated CEO inside debt tend to favor cash as a payment mode for M&As.Research limitations/implicationsOne limitation of this study is the short period of data availability. The data used in this study covers only 2006 and 2007, the periods marked by notable risk-taking activities on the verge of the financial crisis. Although this period is perfectly suitable for our investigation, given the prevalence of conflicts between equity and debt holders, it is essential to acknowledge that our findings may not capture changes or trends over time. Nevertheless, the results offer valuable insights into the factors that influence the behavior of the studied population. Future research could employ a longitudinal design to address this limitation and gain a more comprehensive understanding of the dynamics over extended periods.Practical implicationsOur study has significant implications for businesses and policymakers as it provides insights into the factors contributing to financial crises and how compensation mechanisms can be used to moderate bank risk-taking. We propose that CEO inside debt compensation presents a plausible mechanism that boards of directors can incorporate into bank executive compensation contracts. By doing so, they can promote value-enhancing investments and moderate excessive risk-taking, thereby safeguarding the financial stability of individual banks and overall financial system.Originality/valueOur study sheds light on the beneficial role of bank CEO inside debt for shareholders, contributing empirical backing to the conflict resolution viewpoint in the discourse on wealth appropriation. From a regulatory stance, our findings advocate for the inclusion of bank CEO inside debt in executive remuneration agreements. Such a strategy can empower boards of directors to mitigate undue risk and enhance shareholder value in M&As, safeguarding both individual bank and broader financial system stability.

Assessing the Optimal Digital Banking Model for Service Users in Thailand: A Structural Equation Modelling Approach to Risk Analysis

Purpose –This study investigates the factors that influence the adoption of internet banking in Thailand. It specifically examines the interplay between six dimensions of perceived risk (financial risk, performance risk, privacy risk, security risk, social risk, and time risk), attitude, and trust, and their impact on behavioral intentions to use internet banking.Design/methodology/approach –A multi-stage sampling process was used to obtain a representative sample of 505 respondents in Thailand. Structural Equation Modeling (SEM) was used to analyze the data.Findings –The research outcomes suggest that the adoption and usage of internet banking services are influenced by several key factors, namely perceived risk, attitude, and trust. These factors play a significant role in shaping individuals' decisions and behaviors when it comes to engaging with online banking platforms. The findings also show that attitude and trust mediate the relationship between perceived risk and behavioral intention. Practical implications of this study extend to two key groups: internet banking developers, who can leverage the insights from this research to design user-centric systems aligned with the needs and lifestyles of their target users, and CEOs, who can establish effective and operational strategies and regulations to provide a competitive advantage for their organizations. Originality/value –This study contributes to the existing literature on internet banking adoption by providing a comprehensive understanding of the factors that influence this behavior. It also provides insights for internet banking developers and CEOs on how to design and promote internet banking services in a way that minimizes perceived risk and maximizes attitude and trust.

CEO risk-culture, bank stability and the case of the Silicon Valley Bank

We examine the link between CEO risk-culture and bank stability. Using textual analysis, we construct novel bank CEO risk-culture indicators by analysing Earning Calls transcripts (EC) of 160 US Bank Holding Companies (BHC) for the period between 2002 and 2023. We illustrate and discuss our findings using the case of the recently collapsed Silicon Valley Bank (SVB). We observe a weaker emphasis on governance by SVB in comparison to the benchmark sample. We also show an alignment between CEO risk-culture of SVB and other banks’ CEOs with the highest uninsured deposits, including the later collapsed First Republic Bank. Finally, our regression analysis shows that negative metrics of the CEO risk-culture decrease bank stability.

Close competitors? Bilateral bank competition and spatial variation in firms’ access to credit

Abstract We interviewed 379 bank CEOs in 20 emerging markets to identify their banks’ main competitors. We show that banks are more likely to identify another bank as a main competitor in small-business lending when both banks are foreign owned or relationship oriented; when there exists a large spatial overlap in their branch networks and when the potential competitor has fewer hierarchical layers. We then construct a novel bilateral competition measure at the locality level and assess how well it explains geographic variation in firms’ credit constraints. We show that intense bilateral bank competition tightens local credit constraints, especially for small firms, as competition may impede the formation of lending relationships.

Earnings expectations and the quality of financial services

Using complaint data filed by consumers with the Consumer Financial Protection Bureau against financial institutions, we show that banks receive, on average, 13.3% more customer complaints in the quarter immediately after they narrowly beat analysts’ earnings forecasts. The effect is mainly driven by banks’ attempts to reduce their non-interest expenses to beat earnings benchmarks. The relationship is stronger when bank CEOs receive a greater proportion of incentive-based compensation. Overall, our paper demonstrates how capital market incentives exacerbate shareholder–customer conflicts.

Basel III standards and liquidity determinants in Vietnamese commercial bank

This study aims to ascertain the determinants affecting the liquidity of Vietnamese Commercial Banks by their bank ownership structures, CEO characteristics, and bank-specific variables. Using panel data consisting of 29 Vietnamese commercial banks, we measure liquidity using the most up-to-date method – the Net Stable Funding Difference (NSFD), according to Basel III standards. Correlating to the relationship between CEOs’ characteristics and bank liquidity, we found that CEOs with longer tenure will control liquidity better due to their higher managerial power and entrenchment. Moreover, the findings of the present study show that local market power, bank age, bank size, and loan loss provision positively impact bank liquidity. In contrast, further investigation reveals the adverse impact of state ownership on bank liquidity. This study provides insights into the prudential supervision of Vietnamese commercial banks, which implications for policymakers, by applying the latest liquidity measurement method and new findings on liquidity determinants.

Deregulation and Board Policies: Evidence from Performance and Risk Exposure Measures Used in Bank CEO Turnover Decisions

ABSTRACT We examine the effects of banking deregulation on bank board policies—specifically, whether deregulation affects the performance and risk exposure measures used in bank CEO turnover decisions. Using the staggered adoption of interstate branching as our setting, we find that bank CEO turnover is more (less) sensitive to stock (accounting) performance after deregulation. We also find that deregulation is associated with a higher sensitivity of bank CEO turnover to the idiosyncratic component of tail risk. Moreover, such changes in turnover policies primarily exist in large banks and federally chartered banks, which are best positioned to exploit growth opportunities, and in banks that expand branch operations after deregulation. Our results indicate an increased emphasis on stock performance and tail risk in turnover decisions when growth opportunities are greater in the deregulated environment. The findings provide evidence that the information used in board decisions varies with features of the competitive environment.

The case for independence: Does central bank independence curb the spread of the underground economy?

AbstractThis paper considers an alternate dimension of government institutions associated with the separation of powers between government and its central bank. A more independent central bank is consistent with greater institutional quality and constraints on government. We propose that central bank independence influences the prevalence of the shadow, or underground, economy. Using cross‐country panel data for over 100 nations over the period 1991 to 2012, the results from instrumental variables techniques show that central bank independence curbs underground economic activity. Furthermore, considering different dimensions of independence, we find that independence related to central bank CEO, policy formation, and central bank lending are effective at checking the shadow sector. Overall, these findings are robust to a different measure of the underground economy, correcting for the potential influence of outliers, controlling for the impact of additional factors, accounting for heterogeneity related to the level of development, and considering the heterogeneity related to the prevalence of the shadow sector. The main implication of the results is that nations seeking to reduce the prevalence of the underground economy would benefit from policies that promote central bank independence.

Lender individualism and monitoring: Evidence from syndicated loans

This paper addresses the question, “Does lenders’ culture affect their monitoring efforts and style?”, by exploring whether lender individualism affects the loan monitoring of U.S. borrowers for a sample of 27,164 syndicated loan facilities granted between 1998 and 2017. We proxy lender individualism based on the ancestral country of origin of the lead bank's CEO. We show that lender individualism leads to a less stringent monitoring style. We find that individualist lenders resort less to covenant monitoring, impose less strict contract terms, such as performance pricing and rely more on soft information. We also provide evidence that individualist lenders retain a larger loan share and deal with a larger number of lenders. Finally, we find that some governance characteristics (board size and percentage of female directors) and other CEO features (cash compensation, tenure, and non-duality) moderate the negative association between lender individualism and loan monitoring.

Special Treatment to Bank CEOs in Indonesia

The bank still plays the main role as a funding source in Indonesia. Because of that, they are securing the bank's position and showing its best performance become very important. A Special treatment for bank CEOs is one way. This study wants to answer the question of whether that way is sufficient. The special treatment is the CEO compensation, in the form of CEO salary as the main variable and CEO tenure and insider holding as the control variables. Other control variables are financial ratios: debt-to-equity ratio, lesser prudence, and loan-to-deposit ratio. All variables are associated with bank performance consisting of four variables: net interest margin, return on assets, return on equity, and cash flow to assets. By operating the OLS (ordinary least square), this research shows that CEO compensation in the form of salary has a negative effect on banks’ performance. However, another form of CEO compensation, the insider holding, positively influence on cash flow to assets. These results indicate that salary does not stimulate bank CEOs to do their best, whereas bank CEOs perform well when they also act as insider holders.
 
 Received: 25 August 2022 / Accepted: 16 February 2023 / Published: 5 March 2023

The risk-related tone from the top: evidence from German regional banks

The financial crisis of 2007 and 2008 was a wake-up call for the banking sector. Since then, many activities have been taken to improve the stability of the financial industry. Our paper aims to derive a risk-related tone from the top that enables top management to equalise their employees’ risk behaviour and align the desired risk behaviour with the bank’s risk appetite. Even though individual fragments of measures and requirements to implement a risk-related tone from the top have emerged over the years, a holistic picture is still waiting to be established. Especially the normative management is crucial for implementing a risk-related tone from the top as this channel supports top management in communicating the core values. To gain news insights into the tone from the top and the top managements’ communication behaviour, we use a sequential explanatory mixed method approach. Our aim is to unite the positions of research and supervision. Therefore, we start with a comprehensive literature review to identify the relevant research streams. Building on this theoretical fundament, we evaluate practitioners’ communication behaviour quantitatively via a questionnaire with a sample size of 197 German regional banks. Qualitatively, we analyse the communication behaviour via eight interviews with CEOs of German regional banks. For the supervisory perspective, we build on the FSB ‘Guidance on Supervisory Interaction with Financial Institutions on Risk Culture’. This guidance not only emphasises the importance of the tone from the top, but also provides a first holistic picture of supervisory efforts on the topic. In summary, we consolidate the results from research, supervision and practice to derive a holistic picture for the implementation of a risk-related tone from the top. Finally, our holistic integration reveals future directions for research, supervision and practice.

The Implementation of Central Bank Policy in China: The Roles of Commercial Bank Ownership and CEO Faction Membership

The Implementation of Central Bank Policy in China: The Roles of Commercial Bank Ownership and CEO Faction Membership

Do Bank CEOs Learn from Banking Crises?

Do Bank CEOs Learn from Banking Crises?

Is Bank CEO Pay Sensitive to Operational Risk Event Announcements?

Is Bank CEO Pay Sensitive to Operational Risk Event Announcements?

Digital Marketing Strategies and their Role in Enhancing the Strategic Capabilities of the Bank's Sector in Erbil Governorate

The main purpose of this research is to examine digital marketing strategies and their role in enhancing the strategic capabilities of the bank sector in the Erbil Governorate. The research used the qualitative method to obtain data and classify the study problem, by exploring several questions and concentrating on the relational impact, and variance between research variables. In this regard, a conceptual model is considered and formed three main hypotheses. For data analysis, statistical tests are used namely, correlation test, and regression analysis. The survey was used to obtain data from bank managers such as bank general managers, CEOs, marketing managers, sales managers, and branch managers. A sample of (245) managers participated in the survey by replying to the survey questions, finally, (233) questionnaire forms were obtained for examination and conduct statistical analysis methods through SPSS version 25. Results of correlation analysis showed that digital marketing strategies jointly, and exclusively have a positive and significant relationship with strategic capabilities based on bank managers' perceptions. Results demonstrated that digital marketing strategies positively impacted strategic capabilities. Results showed that attracting clients, communication, client participation, learning strategy, and retaining clients through digital channels positively and significantly impacted strategic capabilities. Furthermore, results showed there were no variances in digital marketing strategies and strategic capabilities according to the bank managers' profiles such as gender, age, level of education, job position, and overall banking experience

Bank CEO risk-taking incentives and bank lending quality

Bank CEO risk-taking incentives and bank lending quality