18 November 2010
Speaker: Tom Kirchmaier (FMG, LSE)
The FMG hosted a research debate based on the paper Boards of Banks by Daniel Ferreira, Tom Kirchmaier and Daniel Metzger (all FMG, LSE).
Abstract:
We show that country characteristics explain most of the cross-sectional variation in bank board independence. In contrast, country characteristics have little explanatory power for the fraction of outside bank directors with experience in the banking industry. Exploiting the time-series dimension of the sample, we show that changes in bank characteristics are not robustly associated with changes in board independence, while changes in board experience are positively related to changes in bank size and negatively related to changes in performance. The evidence suggests that country-specific laws and regulations affect the composition of boards of banks mainly through requirements for director independence. Consistent with regulation having real consequences for banks, we find that board independence – but not board experience – is a robust predictor of bank bailouts during the crisis.
Paper: Boards of Bank |[PDF]
The FMG gratefully acknowledges the generous support received from the
AXA Research Fund. 