Who disciplines bank managers?

Klaus Schaeck*, Martin Cihak, Andrea Maechler, Stephanie Stolz

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)

42 Citations (Scopus)

Abstract

We exploit a unique data set of executive turnovers in community banks to test the micro-mechanisms of discipline by examining the monitoring and influencing role of different stakeholders. We find executives are more likely to be dismissed in risky institutions. Examining the roles of shareholders, debtholders, and regulators as monitors, we obtain evidence for shareholder discipline. However, there is no evidence that risk affects dismissals more if debtholders have a larger stake in the bank or when regulators are aware of distress. Examining the roles of shareholders, debtholders, and regulators as monitors, we obtain evidence for shareholder discipline. However, there is no evidence that risk affects dismissals more if debtholders have a larger stake in the bank or when regulators are aware of distress. When we analyze risk, losses, and profitability following turnovers, we obtain no evidence that replacing executives improves performance.

Original languageEnglish
Pages (from-to)197-243
Number of pages47
JournalReview of Finance
Volume16
Issue number1
DOIs
Publication statusPublished - Jan 2012

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    Schaeck, K., Cihak, M., Maechler, A., & Stolz, S. (2012). Who disciplines bank managers? Review of Finance, 16(1), 197-243. https://doi.org/10.1093/rof/rfr010