Are two heads better than one? Evidence from the thrift crisis

Abstract

a b s t r a c tWe employ a natural experiment from the 1980s, predating the ubiquitous clamor for independence influenced corporate governance structures, to examine which governance mechanisms are associated with firm survival and failure. We find that thrifts were more likely to survive the thrift crisis when their CEO also chaired the firm's board of directors. On average, chair-holding CEOs undertook less aggressive lending policies than their counterparts who did not chair their boards. Consequently, taxpayer interests were protected by thrifts that bestowed both leadership posts to one person. This is an important policy issue, because taxpayers become the residual claimants for depository institutions that fail as a result of managers adopting risky strategies to exploit underpriced deposit insurance. Our findings corroborate recent evidence that manager-dominated firms resist shareholder pressure to adopt riskier investment strategies to exploit underpriced deposit insurance.

CEO chairman controversy: evidence from the post financial crisis period

“…From a policy perspective, these results suggest that no single variable such as Duality can capture an issue as complex as financial institutions governance profiles (Byrd et al 2012). Instead, the overall bundle of governance arrangements and external supervision or monitoring appears to be far more relevant to fully appreciate the trade-off of monitoring choices available to board directors (Rediker and Seth 1995).…”

“…In terms of empirical literature, Byrd et al (2012) examine governance structures, including Duality, for 130 US savings and loan institutions during the 1980s. They find that firms with non-Duality are significantly more likely to fail than those exhibiting Duality.…”

Risk governance: Examining its impact upon bank performance and risk‐taking

“…(), who also find that duality is negatively related to ROA and market returns. However, Byrd et al () present empirical evidence that the presence of duality for a sample of US thrifts was related to lower failure rates, on average, during the 1980s. This latter result resonates with Mamatzakis and Bermpei () who finds duality has a significant and positive result on performance, which chimes with stewardship theories of corporate governance that indicate that a powerful CEO serves as a prudent steward of the firm's asset base and risk profile (Donaldson & Davis, ).…”

The white squire defense: Evidence from private investments in public equity

“…First, we examine the relation between PIPE issuances and lagged takeover probabilities to avoid confounding inferences through any reverse causality (Khan et al, 2012). Next, we estimate the relation between takeover likelihood and PIPE issuance using the recursive bivariate probit model (Greene, 1998;Byrd et al, 2012;Huang et al, 2014;Yermack, 2014), which assumes that the binary dependent and independent variables are each determined by latent linear models with jointly normal error terms (Evans and Schwab, 1995) that can produce an consistent estimator (Greene, 1998). 17 In this model, the probit equations on the takeover target dummy and the PIPE issuance dummy are estimated simultaneously using the maximum likelihood method, in which the instrumental variable, namely industry takeover (ITO), is used in the estimation model of takeover target.…”