Do bank CEOs learn from banking crises?

Does the early-career exposure of bank CEOs to the 1980s savings and loans (S&L) crisis affect the outcomes of banks they subsequently managed? We measure the S&L crisis exposure by the bank failure rate in the states where CEOs worked during the S&L crisis. Armed with this measure, we find that banks managed by CEOs with higher S&L crisis exposure took on less risk and that these banks better survived the financial crisis of 2008. In particular, CEOs adjusted risk attitudes in areas causing the S&L crisis: their more intense crisis experience reduced banks’ interest rate risk , exposure to risky financial innovation and credit risk. We establish the causal interpretation of the findings by evaluating the impact of crisis exposure via CEO hometown states and exploiting quasi-exogenous turnovers due to CEO retirement. Overall, CEOs learned from the past industry crisis which helped curtail their institutions’ risk exposures and enhance later crisis performance.