References (34)



Who Directs the Fed?

Renee B. Adams

University of New South Wales; Financial Research Network (FIRN); European Corporate Governance Institute (ECGI)

January 14, 2011

24th Australasian Finance and Banking Conference 2011 Paper

During the financial crisis, questions arose concerning links between the Federal Reserve and the business community. This paper provides the first in-depth study of one mechanism creating such links: Reserve Bank directorships. By law, each Reserve Bank is governed by a nine member board consisting of three banking representatives and six representatives of the public. Member banks elect six directors, the remaining directors are appointed by the Board of Governors. The representation of private interests on Reserve Bank boards may clearly benefit the public. However, it may also benefit individual director employers, which may not be consistent with the goals of Federal Reserve governance. To shed some light on this issue, I examine who sits on Federal Reserve Bank boards and the market reaction to the appointments of executives of publicly-traded companies over the period 1990-2009. I document that banking representatives are more likely to be chosen from large banks. Furthermore, the average stock price reaction to the appointment of a firm’s officer to a Reserve Bank board is positive only for banks. I discuss potential explanations for these findings.

Number of Pages in PDF File: 59

Keywords: Federal Reserve, Director, Banks, Regulatory Capture, Governance

JEL Classification: E58, G28, G30

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Date posted: March 15, 2011 ; Last revised: July 23, 2012

Suggested Citation

Adams, Renee B., Who Directs the Fed? (January 14, 2011). 24th Australasian Finance and Banking Conference 2011 Paper. Available at SSRN: http://ssrn.com/abstract=1785946 or http://dx.doi.org/10.2139/ssrn.1785946

Contact Information

Renée B. Adams (Contact Author)
University of New South Wales ( email )
Sydney, NSW 2052
+61(2)93854280 (Phone)

Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
HOME PAGE: http://www.firn.org.au

European Corporate Governance Institute (ECGI)
B-1050 Brussels
HOME PAGE: http://www.ecgi.org
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References:  34

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