IDEAS home Printed from https://ideas.repec.org/a/kap/rqfnac/v58y2022i1d10.1007_s11156-021-00996-z.html
   My bibliography  Save this article

Political ideology and CEO performance under crisis

Author

Listed:
  • Katherine Campbell

    (University of North Dakota)

  • Cullen F. Goenner

    (University of North Dakota)

  • Matthew Notbohm

    (University of North Dakota)

  • Adam Smedema

    (University of Wisconsin – Madison)

Abstract

Management quality is known to influence depository institution performance, but less understood are the characteristics of managers that influence performance. We empirically examine how the political ideology of a credit union’s CEO influenced decision making and performance during the financial crisis. Our results indicate that the return on assets of credit unions run by conservative CEOs are 22 basis points lower during the crisis relative to liberal CEOs. Returns are shown to be lower as a direct result of credit unions with conservative CEOs applying more conservative accounting practices for loan losses than their counterparts during the crisis, despite similar loan quality.

Suggested Citation

  • Katherine Campbell & Cullen F. Goenner & Matthew Notbohm & Adam Smedema, 2022. "Political ideology and CEO performance under crisis," Review of Quantitative Finance and Accounting, Springer, vol. 58(1), pages 329-359, January.
    • Handle: RePEc:kap:rqfnac:v:58:y:2022:i:1:d:10.1007_s11156-021-00996-z
    DOI: 10.1007/s11156-021-00996-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11156-021-00996-z
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11156-021-00996-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mondak, Jeffery J & Halperin, Karen D, 2008. "A Framework for the Study of Personality and Political Behaviour," British Journal of Political Science, Cambridge University Press, vol. 38(2), pages 335-362, April.
    2. Aebi, Vincent & Sabato, Gabriele & Schmid, Markus, 2012. "Risk management, corporate governance, and bank performance in the financial crisis," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3213-3226.
    3. Balla, Eliana & Rose, Morgan J., 2015. "Loan loss provisions, accounting constraints, and bank ownership structure," Journal of Economics and Business, Elsevier, vol. 78(C), pages 92-117.
    4. Cullen F. Goenner, 2018. "The market for private student loans: an analysis of credit union exposure, risk, and returns," Review of Quantitative Finance and Accounting, Springer, vol. 50(4), pages 1227-1251, May.
    5. Cronqvist, Henrik & Makhija, Anil K. & Yonker, Scott E., 2012. "Behavioral consistency in corporate finance: CEO personal and corporate leverage," Journal of Financial Economics, Elsevier, vol. 103(1), pages 20-40.
    6. David Ely, 2014. "Credit unions and risk," Journal of Regulatory Economics, Springer, vol. 46(1), pages 80-111, August.
    7. Lawrence Brown & Marcus Caylor, 2009. "Corporate governance and firm operating performance," Review of Quantitative Finance and Accounting, Springer, vol. 32(2), pages 129-144, February.
    8. Lee J. Cohen & Marcia Millon Cornett & Alan J. Marcus & Hassan Tehranian, 2014. "Bank Earnings Management and Tail Risk during the Financial Crisis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(1), pages 171-197, February.
    9. Hong, Harrison & Kostovetsky, Leonard, 2012. "Red and blue investing: Values and finance," Journal of Financial Economics, Elsevier, vol. 103(1), pages 1-19.
    10. Goddard, John & McKillop, Donal & Wilson, John O.S., 2008. "The diversification and financial performance of US credit unions," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1836-1849, September.
    11. Anjan V. Thakor, 2016. "Corporate culture in banking," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 5-16.
    12. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1169-1208.
    13. DeYoung, Robert & Torna, Gökhan, 2013. "Nontraditional banking activities and bank failures during the financial crisis," Journal of Financial Intermediation, Elsevier, vol. 22(3), pages 397-421.
    14. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
    15. Irena Hutton & Danling Jiang & Alok Kumar, 2015. "Political Values, Culture, and Corporate Litigation," Management Science, INFORMS, vol. 61(12), pages 2905-2925, December.
    16. Matthew Notbohm & Katherine Campbell & Adam R. Smedema & Tianming Zhang, 2019. "Management’s personal ideology and financial reporting quality," Review of Quantitative Finance and Accounting, Springer, vol. 52(2), pages 521-571, February.
    17. Neil Esho & Paul Kofman & Ian Sharpe, 2005. "Diversification, Fee Income, and Credit Union Risk," Journal of Financial Services Research, Springer;Western Finance Association, vol. 27(3), pages 259-281, September.
    18. Brad Verhulst & Lindon J. Eaves & Peter K. Hatemi, 2012. "Correlation not Causation: The Relationship between Personality Traits and Political Ideologies," American Journal of Political Science, John Wiley & Sons, vol. 56(1), pages 34-51, January.
    19. Hutton, Irena & Jiang, Danling & Kumar, Alok, 2014. "Corporate Policies of Republican Managers," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 49(5-6), pages 1279-1310, December.
    20. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    21. Rebel A. Cole & Jeffery W. Gunther, 1995. "FIMS: a new monitoring system for banking institutions," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 1-15.
    22. A. Colin Cameron & Douglas L. Miller, 2015. "A Practitioner’s Guide to Cluster-Robust Inference," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 317-372.
    23. Imbens,Guido W. & Rubin,Donald B., 2015. "Causal Inference for Statistics, Social, and Biomedical Sciences," Cambridge Books, Cambridge University Press, number 9780521885881, January.
    24. Gerber, Alan S. & Huber, Gregory A. & Doherty, David & Dowling, Conor M. & Ha, Shang E., 2010. "Personality and Political Attitudes: Relationships across Issue Domains and Political Contexts," American Political Science Review, Cambridge University Press, vol. 104(1), pages 111-133, February.
    25. Ho, Po-Hsin & Huang, Chia-Wei & Lin, Chih-Yung & Yen, Ju-Fang, 2016. "CEO overconfidence and financial crisis: Evidence from bank lending and leverage," Journal of Financial Economics, Elsevier, vol. 120(1), pages 194-209.
    26. Elyasiani, Elyas & Zhang, Ling, 2015. "Bank holding company performance, risk, and “busy” board of directors," Journal of Banking & Finance, Elsevier, vol. 60(C), pages 239-251.
    27. Andrew Ellul & Vijay Yerramilli, 2013. "Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies," Journal of Finance, American Finance Association, vol. 68(5), pages 1757-1803, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Goenner, Cullen F, 2016. "The policy impact of new rules for loan participation on credit union returns," Journal of Banking & Finance, Elsevier, vol. 73(C), pages 198-210.
    2. van Rijn, Jordan, 2018. "The Effect of Membership Expansion on Credit Union Risk and Returns," Staff Paper Series 588, University of Wisconsin, Agricultural and Applied Economics.
    3. Jeffrey Smith & Arthur Sweetman, 2016. "Viewpoint: Estimating the causal effects of policies and programs," Canadian Journal of Economics, Canadian Economics Association, vol. 49(3), pages 871-905, August.
    4. Adhikari, Binay Kumar & Agrawal, Anup, 2016. "Does local religiosity matter for bank risk-taking?," Journal of Corporate Finance, Elsevier, vol. 38(C), pages 272-293.
    5. Danso, Albert & Lartey, Theophilus & Amankwah-Amoah, Joseph & Adomako, Samuel & Lu, Qinye & Uddin, Moshfique, 2019. "Market sentiment and firm investment decision-making," International Review of Financial Analysis, Elsevier, vol. 66(C).
    6. Cronqvist, Henrik & Yu, Frank, 2017. "Shaped by their daughters: Executives, female socialization, and corporate social responsibility," Journal of Financial Economics, Elsevier, vol. 126(3), pages 543-562.
    7. Duong, Kiet Tuan & Banti, Chiara & Instefjord, Norvald, 2021. "Managerial conservatism and corporate policies," Journal of Corporate Finance, Elsevier, vol. 68(C).
    8. Danling Jiang & Alok Kumar & Kelvin K. F. Law, 2016. "Political contributions and analyst behavior," Review of Accounting Studies, Springer, vol. 21(1), pages 37-88, March.
    9. Leung, Woon Sau & Song, Wei & Chen, Jie, 2019. "Does bank stakeholder orientation enhance financial stability?," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 38-63.
    10. Chronopoulos, Dimitris K. & Wilson, John O.S. & Yilmaz, Muhammed H., 2023. "Regulatory oversight and bank risk," Journal of Financial Stability, Elsevier, vol. 64(C).
    11. Sangyong Han & Kwangmin Jung, 2023. "CEO political orientation, risk taking, and firm performance: evidence from the U.S. property-liability insurance industry," Economics of Governance, Springer, vol. 24(1), pages 1-39, March.
    12. Liao, Shushu & Nguyen, Nhut H. & Truong, Cameron, 2024. "Does CEO extraversion pay off when in need? Evidence from the global financial crisis," The British Accounting Review, Elsevier, vol. 56(4).
    13. Matthew Notbohm & Katherine Campbell & Adam R. Smedema & Tianming Zhang, 2019. "Management’s personal ideology and financial reporting quality," Review of Quantitative Finance and Accounting, Springer, vol. 52(2), pages 521-571, February.
    14. Leung, Henry & Tse, Jeffrey & Westerholm, P. Joakim, 2019. "CEO traders and corporate acquisitions," Journal of Corporate Finance, Elsevier, vol. 54(C), pages 107-127.
    15. van Rijn, Jordan, 2024. "The effects of membership expansion on credit union risk and returns," International Review of Financial Analysis, Elsevier, vol. 93(C).
    16. Andrés Elberg & Pedro M. Gardete & Rosario Macera & Carlos Noton, 2019. "Dynamic effects of price promotions: field evidence, consumer search, and supply-side implications," Quantitative Marketing and Economics (QME), Springer, vol. 17(1), pages 1-58, March.
    17. Enkhtaivan, Bolortuya & Davaadorj, Zagdbazar, 2021. "Do they recall their past? CEOs’ liquidity policies across firms as they switch jobs," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    18. Kerstin Lopatta & Sebastian Tideman & Katarina Böttcher & Timm Wichern, 2019. "Managerial Style – A Literature Review and Research Agenda," International Business Research, Canadian Center of Science and Education, vol. 12(2), pages 80-98, February.
    19. Naaman, Christine & Magnan, Michel & Hammami, Ahmad & Yao, Li, 2021. "Credit unions vs. commercial banks, who takes more risk?," Research in International Business and Finance, Elsevier, vol. 55(C).
    20. Abakah, Alex Annan & Li, Jiayan, 2023. "Local religious beliefs and bank risk-taking," Journal of Behavioral and Experimental Finance, Elsevier, vol. 40(C).

    More about this item

    Keywords

    Credit unions; Accounting practices; Performance; Conservatism; Financial crisis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:rqfnac:v:58:y:2022:i:1:d:10.1007_s11156-021-00996-z. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.