Executive Age and Bank Risk-Taking

This paper examines the influence of CEO and CFO age on bank risk-taking. Using data on large U.S. banks between 2006 and 2018, we document a negative association between CEO age and the bank’s insolvency risk and market-based measures of risk-taking after controlling for bank size, asset growth, funding and income structures, and various other bank characteristics. In stark contrast, however, we find that banks with older CFOs exhibit higher levels of stock return volatility, systematic risk, idiosyncratic risk, and tail risk. Our further tests suggest that the positive relationship between CFO age and bank risk-taking can be at least partially explained by differences in banks’ investment policies, funding structure, and executive compensation incentives