TY  - JOUR
AU  - Fahlenbrach,Rüdiger
AU  - Stulz,René M.
TI  - Bank CEO Incentives and the Credit Crisis
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15212
PY  - 2009
Y2  - August 2009
UR  - http://www.nber.org/papers/w15212
L1  - http://www.nber.org/papers/w15212.pdf
N1  - Author contact info:
Rüdiger Fahlenbrach
Ecole Polytechnique Fédérale de Lausanne (EPFL)
Quartier UNIL-Dorigny Bâtiment Extranef, # 211
1015 Lausanne
Switzerland
E-Mail: ruediger.fahlenbrach@epfl.ch

Rene M. Stulz
The Ohio State University
Fisher College of Business
806A Fisher Hall
Columbus, OH 43210-1144
Tel: 614/292-1970
Fax: 614/292-2359
E-Mail: stulz_1@cob.osu.edu
AB  - We investigate whether bank performance during the credit crisis of 2008 is related to CEO incentives and share ownership before the crisis and whether CEOs reduced their equity stakes in their banks in anticipation of the crisis. There is no evidence that banks with CEOs whose incentives were better aligned with the interests of their shareholders performed better during the crisis and some evidence that these banks actually performed worse both in terms of stock returns and in terms of accounting return on equity. Further, option compensation did not have an adverse impact on bank performance during the crisis. Bank CEOs did not reduce their holdings of shares in anticipation of the crisis or during the crisis; further, there is no evidence that they hedged their equity exposure. Consequently, they suffered extremely large wealth losses as a result of the crisis.
ER  -