N°25-34: Skilled Banker Mobility and Bank Default

This study investigates the impact of skilled banker mobility risk on bank fragility. Using a novel measure of skilled banker mobility risk, we find that an increase in this risk raises the probability of bank default. The effect is more pronounced for banks facing higher competition and with a high proportion of non-performing loans. Further we show that labor mobility restriction laws can help mitigate the detrimental effect of skilled banker mobility risk. Our findings suggest that skilled banker mobility can exacerbate bank fragility, but proper policies can bolster resilience against possible adverse effects from labor market frictions.