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Endogenously Structured Boards of Directors in Banks


Shams Pathan


The University of Queensland; University of Queensland - Business School; Financial Research Network (FIRN)

Michael T. Skully


Monash University - Department of Accounting and Finance; Financial Research Network (FIRN)

March 3, 2010

Journal of Banking and Finance, Vol. 34, No. 7, pp. 1590-1606

Abstract:     
This paper examines the trends and endogenous determinants of boards of directors (board size, composition, and CEO duality) for a sample of 212 US bank holding companies, from 1997 to 2004. Overall, the results show that the costs and benefits of boards’ monitoring and advising roles could explain bank board structures with caveats. For example, due to the regulatory nature and comparatively intensive scrutiny of bank officers and directors, it is argued that bank managers have less control over the directors’ selection processes. Thus, bank board independence should not be the outcome of negotiation with CEOs. Consistent with this view, bank CEOs are found not to affect bank board independence. The trend analysis also provides some important results. In contrast to non-bank evidence, for instance, board size was discovered to decrease over the sample period for large and medium-sized banks, while board size remained relatively stable for small banks. These results are robust with respect to different estimation specifications. Furthermore, the study’s findings have important policy implications for bank regulators and investors.

Number of Pages in PDF File: 41

Keywords: Board of directors, Independent directors, CEO, CEO duality, Endogenous, Bank Holding Companies

JEL Classification: G21, G28, G30, G32, G34, L22, K22

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Date posted: August 25, 2008 ; Last revised: December 26, 2012

Suggested Citation

Pathan, Shams and Skully, Michael T., Endogenously Structured Boards of Directors in Banks (March 3, 2010). Journal of Banking and Finance, Vol. 34, No. 7, pp. 1590-1606. Available at SSRN: http://ssrn.com/abstract=1251262 or http://dx.doi.org/10.2139/ssrn.1251262

Contact Information

Shams Pathan (Contact Author)
The University of Queensland ( email ) ( email )
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Brisbane, 4072
Australia
HOME PAGE: http://www.business.uq.edu.au/staff/staff_details?name=spathan&action=show_all

University of Queensland - Business School ( email )
The University of Queensland
Brisbane, Queensland 4072
Australia
61 7 3346 8075 (Phone)
61 7 3346 8166 (Fax)
HOME PAGE: http://www.business.uq.edu.au/staff/details/shams-pathan
Financial Research Network (FIRN) ( email ) ( email )
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Brisbane, 4072
Australia
HOME PAGE: http://www.business.uq.edu.au/staff/staff_details?name=spathan&action=show_all

Michael T. Skully
Monash University - Department of Accounting and Finance ( email )
900 Dandenong Road
Caulfield East, Victoria 3145
Australia
+61 3 9903 2407 (Phone)
+61 3 9903 1443 (Fax)
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

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References:  58
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