Supplementary Appendix: Bank CEO Optimism and the Financial Crisis Yueran Ma∗ I Additional Tables Table A1: CEO Optimism and Pre-Crisis Growth of Real Estate Loans (Matching Estimates) CEOs in sample are divided into the \more optimistic" group (CEO equity holding change above median) and the \less optimistic" group (CEO equity holding change below median). The constant term is the matching estimate of the difference in real estate loan growth between these two subsamples. The matching covariates used in a given specification are labeled with \Yes", and the set of covariates are the same as the control variables in Table 4 in the paper. I use matching with replacement and three matched observations per target observation (with bias adjustment). Log Change in Loans backed by RE (2002|2005) (1) (2) (3) (4) (5) Constant 0.158*** 0.114** 0.178*** 0.110** 0.178*** (0.0511) (0.0444) (0.0610) (0.0429) (0.0560) Matching Covariates FHFA Index Change Yes Yes Yes Dividend Yield as of 2002 Yes Yes Yes Yes Volatility as of 2002 Yes Yes Yes Yes RE Loans/Assets by 2002 Yes Yes Yes Yes Size (log assets) by 2002 Yes Yes Yes Yes Log Holding Change (98{01) Yes Yes RE Loan Growth (98{01) Yes Yes Observations 142 136 76 136 76 Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 ∗Harvard University (email: [email protected]). 1 Table A2: CEO Optimism and Loans Sold for Securitization This table performs the same set of tests as Table 5 of the paper using HMDA data, but focus on originated-and-sold loans rather than originated-and-held loans: The dependent variable is the bank fixed effect bi estimated from log(loan0205ij) − log(loan9801ij) = bi + cj + ij, where loan0205ij is the total originated-and-sold HMDA loans made in 2002|2005 by bank i in county j, loan9801ij is the total originated-and-sold HMDA loans made in 1998|2001 by bank i in county j, and cj is the county fixed effect. The control variables are the same as in Table 5 of the paper. Bank Fixed Effect bi (1) (2) (3) (4) Log Holding Change (02{05) 1.688* 1.802 1.395 1.434 (0.886) (1.141) (0.883) (1.165) Log Holding Change (No Action) 0.617 0.680 (0.583) (0.585) Dividend Yield as of 2002 1.407 2.785 (11.28) (11.77) Volatility as of 2002 0.380 0.493 (1.459) (1.498) Size (log assets) by 2002 -0.0149 -0.0383 (0.133) (0.124) RE Loans/Assets by 2002 0.285 0.250 (1.537) (1.558) Constant -1.829*** -2.091 -1.911*** -2.075 (0.173) (1.574) (0.197) (1.575) Observations 116 108 116 108 R-squared 0.044 0.051 0.053 0.063 Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 2 CEO Optimism and Pre-Crisis Growth of Housing Loans: Alternative Specifications Table A3: Alternative Specification 1: Including Credit Commitments Backed by Real Estate Alternative specification of Table 4 in the paper where the dependent variable includes both loans and loan commitments backed by real estate. Loan commitments backed by real estate is the sum of items BHCK3814, BHCK3816, and BHCK6550 in FR-9YC. Growth of RE Loans & Commitments (2002|2005) (1) (2) (3) (4) (5) Log Holding Change (02{05) 0.321*** 0.279*** 0.361*** 0.336*** 0.315*** (0.0829) (0.0790) (0.124) (0.117) (0.110) Dividend Yield as of 2002 -4.368*** -2.206 -2.074 (1.462) (2.461) (2.413) Volatility as of 2002 0.172 0.354 0.350 (0.267) (0.302) (0.291) RE Loans&Comm/Asset as of 2002 -0.0779 -0.164 -0.173 (0.167) (0.172) (0.164) Size (log assets) by 2002 -0.0188 -0.0277* -0.0293** (0.0143) (0.0148) (0.0145) Log Holding Change (98{01) -0.0332 -0.0417* -0.0382* (0.0211) (0.0239) (0.0215) RE Loans&Comm. Growth (98{01) 0.327** 0.274** 0.264** (0.126) (0.106) (0.104) FHFA Index Change (02{05) 0.321 (0.249) Constant 0.452*** 0.678*** 0.293*** 0.556*** 0.494** (0.0256) (0.198) (0.0528) (0.188) (0.190) Observations 142 136 77 76 76 R-squared 0.080 0.160 0.242 0.320 0.344 Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 3 Table A4: Alternative Specification 2: Log Change of Real Estate Loan Share in Total Assets Alternative specification of Table 4 in the paper where the dependent variable is the log change of the share of loans backed by real estate in total assets. Log Change of RE Loan/Asset (2002|2005) (1) (2) (3) (4) (5) Log Holding Change (02{05) 0.136*** 0.133*** 0.219*** 0.182*** 0.173** (0.0413) (0.0409) (0.0764) (0.0679) (0.0683) Dividend Yield as of 2002 0.733 3.324** 3.388*** (0.737) (1.258) (1.247) Volatility as of 2002 0.00834 0.213 0.210 (0.127) (0.138) (0.135) RE Loans/Assets by 2002 -0.358*** -0.351*** -0.355*** (0.0862) (0.0932) (0.0919) Size (log assets) by 2002 -0.0173** -0.00666 -0.00741 (0.00816) (0.00905) (0.00900) Log Holding Change (98{01) -0.0135 -0.0259** -0.0244** (0.0101) (0.0112) (0.0106) Log Change RE Loan Share (98{01) -0.0676 -0.00731 -0.00976 (0.0988) (0.114) (0.111) FHFA Index Change (02{05) 0.133 (0.122) Constant 0.0723*** 0.346*** 0.0899*** 0.132 0.106 (0.0119) (0.110) (0.0162) (0.116) (0.115) Observations 142 136 77 76 76 R-squared 0.065 0.189 0.113 0.319 0.334 Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 4 Table A5: Alternative Specification 3: Excluding AZ, CA, FL and NV Alternative specification of Table 4 in the paper where banks headquartered in Arizona, California, Florida and Nevada are excluded. The dependent variable and independent variables are the same as in Table 4. Log Change of RE Loans (2002|2005) (1) (2) (3) (4) (5) Log Holding Change (02{05) 0.251*** 0.211*** 0.302*** 0.280*** 0.271*** (0.0836) (0.0732) (0.113) (0.100) (0.0991) Dividend Yield as of 2002 -4.248*** -0.140 -0.360 (1.516) (2.026) (2.198) Volatility as of 2002 -0.0207 0.164 0.170 (0.197) (0.232) (0.242) RE Loans/Assets by 2002 -0.176 -0.285* -0.284* (0.165) (0.162) (0.163) Size (log assets) by 2002 -0.0211 -0.0193 -0.0186 (0.0156) (0.0183) (0.0179) Log Holding Change (98{01) -0.0433** -0.0539*** -0.0501** (0.0174) (0.0197) (0.0194) RE Loan Growth (98{01) 0.206** 0.223** 0.218* (0.103) (0.111) (0.109) FHFA Index Change (02{05) 0.219 (0.255) Constant 0.406*** 0.757*** 0.312*** 0.530*** 0.481** (0.0245) (0.184) (0.0467) (0.199) (0.212) Observations 128 122 70 69 69 R-squared 0.054 0.119 0.182 0.228 0.238 Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 5 Table A6: Alternative Specification 4: CEO Optimism and Growth of Housing Loans (2002|2006) Alternative specification of Table 4 in the paper where the time period is 2002 to 2006 instead of 2002 to 2005: The dependent variable is log change of real estate loans from 2002 to 2006, and the main independent variable is log equity holding change from 2002 to 2006. Log Change of RE Loans (2002|2006) (1) (2) (3) (4) (5) Log Holding Change (02{06) 0.219** 0.195** 0.173* 0.206** 0.203** (0.0836) (0.0755) (0.0885) (0.0818) (0.0784) Dividend Yield as of 2002 -4.232** 1.338 1.353 (2.043) (2.639) (2.675) Volatility as of 2002 -0.0827 -0.121 -0.107 (0.211) (0.291) (0.298) RE Loans/Assets by 2002 -0.192 -0.269 -0.284 (0.229) (0.257) (0.250) Size (log assets) by 2002 -0.0398** -0.0606*** -0.0614*** (0.0195) (0.0186) (0.0188) Log Holding Change (98{01) 0.0136 -0.00765 -0.00893 (0.0268) (0.0298) (0.0273) RE Loan Growth (98{01) 0.332** 0.413*** 0.411*** (0.134) (0.147) (0.146) FHFA Index Change (02{06) 0.130 (0.216) Constant 0.553*** 1.057*** 0.381*** 0.931*** 0.898*** (0.0314) (0.244) (0.0576) (0.237) (0.240) Observations 125 120 67 66 66 R-squared 0.046 0.112 0.166 0.267 0.273 Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 6 Table A7: CFO, COO Optimism and Pre-Crisis Growth of Housing Loans This table replicates the regressions in Table 4 in the paper using measured optimism for CFOs and COOs instead of that for CEOs. The dependent variable and controls are the same as in Table 4. Log Change in Loans Backed by Real Estate (2002|2005) Measured Optimism of CFO COO Log Holding Change (02{05) -0.0330 -0.0429 0.00450 -0.0629 0.156** 0.128 0.209** 0.184* (0.0697) (0.0672) (0.0745) (0.0825) (0.0779) (0.0779) (0.0923) (0.0958) Dividend Yield as of 2002 -0.315 6.082 -3.268** 0.125 (2.187) (4.302) (1.605) (2.008) Volatility as of 2002 0.148 0.374 0.496** 0.448** (0.243) (0.393) (0.211) (0.220) 7 RE Loans/Assets by 2002 -0.105 -0.473 0.0821 -0.174 (0.188) (0.293) (0.172) (0.183) Size (log assets) by 2002 -0.0500*** -0.0661** -0.00578 0.00258 (0.0151) (0.0312) (0.0140) (0.0175) Log Holding Change (98{01) -0.00686 -0.0453 -0.0571 -0.0622 (0.0312) (0.0348) (0.0522) (0.0501) RE Loan Growth (98{01) 0.0797 0.0724 0.257*** 0.226** (0.147) (0.158) (0.0916) (0.0977) Constant 0.426*** 0.786*** 0.387*** 0.816** 0.400*** 0.321* 0.312*** 0.225 (0.0292) (0.201) (0.0822) (0.378) (0.0231) (0.192) (0.0495) (0.210) Observations 98 96 46 46 119 114 76 74 R-squared 0.003 0.106 0.013 0.274 0.035 0.160 0.177 0.225 Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 Table A8: CFO, COO Optimism and Stock Performance during the Financial Crisis This table replicates the regressions in Table 7 in the paper by using measured optimism for CFOs and COOs instead of that for CEOs.