Holding Bankers Liable: Personal Guarantees and Risk-taking in Security Underwriting - with Peter Koudijs
Does additional liability for bank executives improve risk management? We address this question using uniquely detailed data on the underwriting activities of one of the largest Dutch banks in the early 20th century. Its executives faced additional liability as they personally guaranteed part of their banks’ security underwriting. If the issuance was successful, they received the underwriting fee; if it failed, they had to purchase securities at a loss. Exploiting exogenous discontinuities in the size of these guarantees, we find that issuance quality was higher for larger guarantees. Investor subscription rates were higher, issuing firms had stronger balance sheets, issuing governments had higher debt capacity, and subsequent security returns were higher. Results indicate that additional liability directly tied to executives' decisions can help reduce bank risk-taking.
Presentations: EFA Ghent 2026 (scheduled), Gerzensee ESSFM 2026* (scheduled), Federal Reserve Financial and Monetary History Conference (2026), CEPR International Macro-History Online Seminar Series (2025), IBEFA WEAI Summer Meeting (2025), Sveriges Riksbank Conference 'Monetary and Financial History: Lessons for the 21st Century' (2024), Finance & History Workshop 200 Years Brussels Stock Exchange (2024), Groningen Summer School 'Financial, Economic and Business History' (2024), Groningen Growth and Development Centre Conference (2024), ERIM Finance PhD Seminar (2024), ESE PhD Seminar (2024).
*presented by co-author
Competing for Deposits: Historical Evidence from the Depository of Last Resort (Job Market Paper)
How does public access to central bank deposits affect commercial banks? Using a unique historical setting, this paper shows that central bank retail deposits lay dormant in normal times, but not in periods of heightened uncertainty. The outbreak of World War I in neighboring countries triggered a flight-to-safety in the Netherlands. Commercial banks faced increased deposit competition as deposits at the central bank reached unprecedented levels. Highly exposed banks, with a larger share of branches in central bank cities, raised their short-term deposit rates further and were more likely to invert their deposit term structure. Those exposed banks relied less on deposits in their funding mix and expanded their balance sheets less in the following years.
Presentations: 4th Durham Job Market Paper in Finance Conference, ECB DG/R Internal Seminar, CeMoF/Riksbank Fifth PhD Workshop in Money and Finance, ESE/RSM PhD Seminar.
The Dawn of Deposit Banking in the Netherlands - with Remo Oostdam