Leverage, CEO Risk-Taking Incentives, and Bank Failure during the 2007–10 Financial Crisis*

Bank CEO Optimism and the Financial Crisis∗

I test theories of the recent financial crisis by studying how banks’ pre-crisis investments connect to their CEOs’ beliefs. Using different proxies for beliefs, I find banks with larger housing investments and worse crisis performance had CEOs who were more optimistic ex ante. Banks with the most optimistic CEOs experienced 20 percentage points higher real estate loan growth, and 15 percentage...

CEO Risk-Taking Incentives based on Environmental Sustainability

In this study, I try to examine the effect of environmental sustainability on CEO risk taking. Prior research, however, has struggled to establish this relation empirically; moreover, some evidence points to the possibility that the CEO risk appetite is lower for firms with sustainable environment. The opportunistic approach of managers leads to decisions about personal interests and imposing c...

Impact of risk taking on bank financial performance during 2008 financial crisis

This paper studies the relationship among corporate governance, risk taking and financial performance at bank holding companies’ (BHCs) during the financial crisis of 2008. While the paper did not find a significant relationship between corporate governance and risk-taking level, it shows that BHCs with lower risk performed better than BHCs with higher risk during the crisis. The results sugges...

Human Migration and Commercial Bank Risk During the Financial Crisis

The Leverage Ratio, Risk-Taking and Bank Stability

Under the new Basel III banking regulations, a non-risk based leverage ratio will be introduced alongside the risk-based capital requirement. This move away from a solely risk-based capital framework has raised some concern of increased bank risk-taking; potentially offsetting any benefits from requiring highly leveraged banks to hold more capital. We address exactly this tradeoff between addit...