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Working Paper
Who's minding the store? motivating and monitoring hired managers at small, closely held firms: the case of commercial banks
We test whether the gains from hiring an outside manager exceed the principal-agent costs of owner-manager separation at 266 small, closely held U.S. commercial banks. Our results suggest that hiring an outside manager can improve a bank's profit efficiency, but that these gains depend on aligning the hired managers with owners via managerial shareholdings. We find that over-utilizing this control mechanism results in entrenchment, while under-utilization is costly in terms of foregone profits. This study provides a relatively unfettered test of mitigating principal-agent costs, because these ...
Working Paper
What can financial stability reports tell us about macroprudential supervision?
Many countries have suggested macroprudential supervision as a means for earlier identification and better control of the risks that might lead to a financial crisis. Since macroprudential supervision would focus on the financial system in its entirety and on major risks that could threaten financial stability, it shares many of the same goals as the financial stability reports written by most central banks. This article examines the financial stability reports of five central banks to assess how effective they were in identifying the problems that led to the recent financial crisis and what ...
Journal Article
Bank examination classifications and loan risk
Journal Article
Kansas banking in the 1930s: the deposit insurance choice and implications for public policy
The recent financial crisis reopened debate about how much public assistance to give to distressed financial institutions. Some argue that even traditional assistance in the form of federal deposit insurance can create moral hazard problems, leading banks to take on greater risk once they are insured. ; Authors Spong and Regehr take a look at a unique situation in Kansas among state-chartered banks, in the wake of the 1930s banking crisis, that affords a rare opportunity to compare insured banks with uninsured ones. After the introduction of federal deposit insurance in 1934, a significant ...
Journal Article
The outlook for the U.S. banking industry : what does the experience of the 1980s and 1990s tell us?
In many respects, the 1980s appear to be the worst decade in banking since the Great Depression, while the 1990s could be rated as the best. Over 1,100 commercial banks failed or needed FDIC assistance during the 1980s, and significant parts of the thrift industry became insolvent and had to be resolved, costing taxpayers $125 billion. In contrast, the banking industry began a dramatic recovery in the first half of 1990s and has recently achieved record profitability, extremely low levels of loan losses, and the highest capital ratios since the early 1940s. As a result, the number of banks ...
Journal Article
Interstate bank expansion: a comparison across individual states
Journal Article
One-bank holding company debt: regulatory policy and experience
Journal Article
Bank profits in a changing environment
Journal Article
Interstate banking - what are the competitive effects?
Journal Article
The relationship between loan classifications and losses : the effects of a changing economy
The agriculture and energy sectors suffered dramatic declines during the 1980s in the Tenth Federal Reserve District. Bank asset quality also declined during this time period, particularly for farm banks. Using information on loan classifications and charge-offs, this study traces classified loans over time to determine their subsequent performance. ; This study found that examiners were able to identify a majority of the problem credits prior to charge-off. Additionally, examiners were able to distinguish the relative riskiness of problem credits. Economic conditions were found to have a ...