CEO risk-culture, bank stability and the case of the Silicon Valley Bank

Artur Semeyutin; Said Kaawach; Alper Kara

doi:10.1016/j.econlet.2023.111373

CEO risk-culture, bank stability and the case of the Silicon Valley Bank

Artur Semeyutin, Said Kaawach, Alper Kara

Research output: Contribution to journal › Article › peer-review

Abstract

We examine the link between CEO risk-culture and bank stability. Using textual analysis, we construct novel bank CEO risk-culture indicators by analysing Earning Calls transcripts (EC) of 160 US Bank Holding Companies (BHC) for the period between 2002 and 2023. We illustrate and discuss our findings using the case of the recently collapsed Silicon Valley Bank (SVB). We observe a weaker emphasis on governance by SVB in comparison to the benchmark sample. We also show an alignment between CEO risk-culture of SVB and other banks’ CEOs with the highest uninsured deposits, including the later collapsed First Republic Bank. Finally, our regression analysis shows that negative metrics of the CEO risk-culture decrease bank stability.

Original language	English
Article number	111373
Number of pages	6
Journal	Economics Letters
Volume	233
Early online date	7 Oct 2023
DOIs	https://doi.org/10.1016/j.econlet.2023.111373
Publication status	Published - 1 Dec 2023

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title = "CEO risk-culture, bank stability and the case of the Silicon Valley Bank",

abstract = "We examine the link between CEO risk-culture and bank stability. Using textual analysis, we construct novel bank CEO risk-culture indicators by analysing Earning Calls transcripts (EC) of 160 US Bank Holding Companies (BHC) for the period between 2002 and 2023. We illustrate and discuss our findings using the case of the recently collapsed Silicon Valley Bank (SVB). We observe a weaker emphasis on governance by SVB in comparison to the benchmark sample. We also show an alignment between CEO risk-culture of SVB and other banks{\textquoteright} CEOs with the highest uninsured deposits, including the later collapsed First Republic Bank. Finally, our regression analysis shows that negative metrics of the CEO risk-culture decrease bank stability.",

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AU - Semeyutin, Artur

AU - Kaawach, Said

AU - Kara, Alper

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N2 - We examine the link between CEO risk-culture and bank stability. Using textual analysis, we construct novel bank CEO risk-culture indicators by analysing Earning Calls transcripts (EC) of 160 US Bank Holding Companies (BHC) for the period between 2002 and 2023. We illustrate and discuss our findings using the case of the recently collapsed Silicon Valley Bank (SVB). We observe a weaker emphasis on governance by SVB in comparison to the benchmark sample. We also show an alignment between CEO risk-culture of SVB and other banks’ CEOs with the highest uninsured deposits, including the later collapsed First Republic Bank. Finally, our regression analysis shows that negative metrics of the CEO risk-culture decrease bank stability.

AB - We examine the link between CEO risk-culture and bank stability. Using textual analysis, we construct novel bank CEO risk-culture indicators by analysing Earning Calls transcripts (EC) of 160 US Bank Holding Companies (BHC) for the period between 2002 and 2023. We illustrate and discuss our findings using the case of the recently collapsed Silicon Valley Bank (SVB). We observe a weaker emphasis on governance by SVB in comparison to the benchmark sample. We also show an alignment between CEO risk-culture of SVB and other banks’ CEOs with the highest uninsured deposits, including the later collapsed First Republic Bank. Finally, our regression analysis shows that negative metrics of the CEO risk-culture decrease bank stability.

KW - Risk culture

KW - Machine Learning

KW - Text Analysis

KW - Earning Calls

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DO - 10.1016/j.econlet.2023.111373

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VL - 233

JO - Economics Letters

JF - Economics Letters

SN - 0165-1765

M1 - 111373

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CEO risk-culture, bank stability and the case of the Silicon Valley Bank

Abstract

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CEO Risk-Culture, Bank Stability and the Case of the Silicon Valley Bank

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