Which executive characteristics create value in banking? Evidence from appointment announcements

Duc Duy (Louis) Nguyen, Jens Hagendorff, Arman Eshraghi

Research output: Contribution to journalArticlepeer-review

40 Citations (Scopus)
4 Downloads (Pure)

Abstract

Manuscript Type
Empirical

Research Question/Issue
This study seeks to understand how the characteristics of executive directors affect the market performance of US banks. To explore the expected performance effects linked to executive characteristics, we measure any changes in the market valuation of banks linked to announcements of executive appointments.

Research Findings/Insights
Our study has two important findings. First, we show that age, education, and the prior work experience of executives create shareholder wealth while gender is not linked to measurable value effects. Second, these wealth effects are moderated by the level of influence of incoming executives, with their magnitude diminished under independent boards and higher if the incoming executive is also appointed as CEO. Our results are robust to the treatment of selection bias.

Theoretical/Academic Implications
By illustrating the wealth effects linked to executive appointments, our study contributes to the current debate on whether and how individual executives matter for firm performance and behavior. The findings also shed light on the value of human capital in the banking industry.

Practitioner/Policy Implications
This study offers important insights to policymakers charged with ensuring the competency of executives in banking. Our findings advocate policies that mandate banks to appoint highly qualified executives with relevant banking experience.
Original languageEnglish
Pages (from-to)112-128
JournalCorporate Governance: An International Review
Volume23
Issue number2
Early online date23 Sept 2014
DOIs
Publication statusPublished - 19 Mar 2015

Keywords

  • Corporate governance
  • Banks
  • Executives characteristics
  • Market value

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