Political Ideology and CEO Performance under Crisis

• In Event: Political Issues and Foreign Investment

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 conservative credit unions applying conservative accounting practices during the crisis. Conservative CEOs make larger discretionary provisions for loan losses than their counterparts, despite similar loan quality.

Authors

• Matthew Adam Notbohm, University of North Dakota

• Katherine Campbell, University of North Dakota

• Adam Smedema, University of Wisconsin

• Cullen Goenner, University of North Dakota