Endogenously Structured Boards of Directors in Banks

41 Pages Posted: 25 Aug 2008 Last revised: 26 Dec 2012

See all articles by Shams Pathan

Shams Pathan

affiliation not provided to SSRN

Michael T. Skully

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

Date Written: March 3, 2010


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.

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

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

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: https://ssrn.com/abstract=1251262 or http://dx.doi.org/10.2139/ssrn.1251262

Shams Pathan (Contact Author)

affiliation not provided to SSRN

Michael T. Skully

Monash University - Department of Banking and Finance ( email )

900 Dandenong Road
Caulfield East, Victoria 3145
+61 3 9903 2407 (Phone)
+61 3 9903 1443 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane

HOME PAGE: http://www.firn.org.au

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