The Wolves of Wall Street: Managerial Attributes and Bank Business Models

We investigate the role of executive-specific attributes in explaining bank business models beyond pay-per-performance incentives. We decompose the variation in business models and show that idiosyncratic manager-specific effects (or ‘styles’) of members of a bank’s top management team are reflected in key bank policy choices. Manager styles far outrank executive compensation and other observable manager variables in terms of their ability to describe variation in bank business models. Bank manager styles also explain differences in risk and performance across banks, including cross-sectional variation in bank risk during the global financial crisis. Finally, we combine manager styles from various bank policies to derive manager profiles that are associated with managers’ personal risk preferences, board characteristics and whether or not managers will be appointed as CEO during their careers.

Steffen, Sascha, Jens Hagendorff, Anthony Saunders and Francesco Vallascas (2016), The Wolves of Wall Street: Managerial Attributes and Bank Business Models,