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Identifier to cite or link to this item: https://hdl.handle.net/10086/29227

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Title
The Effectiveness of Corporate Boards: Evidence from Bank Loan Contracting
Creator
Creator Name
Francis, Bill Francis, Bill
Affiliation
Affiliation Name
Lally School of Management and Technology, Rensselaer Polytechnic Institute
Creator Name
Hasan, Iftekhar Hasan, Iftekhar
Affiliation
Affiliation Name
Lally School of Management and Technology, Rensselaer Polytechnic Institute
Bank of Finland
Creator Name
Koetter, Michael Koetter, Michael
Affiliation
Affiliation Name
Department of Economics, University of Groningen
Creator Name
Wu, Qiang Wu, Qiang
Affiliation
Affiliation Name
Lally School of Management and Technology, Rensselaer Polytechnic Institute
Editor
Contributor Name
Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University
Affiliation
Affiliation Name
Institute of Economic Research, Hitotsubashi University
Key Word
Bank loan contracting
Boards of directors
Corporate governance
Monitoring
SOX
JEL
G21
G34
Abstract
This paper investigates the role of corporate boards in bank loan contracting. We find that when corporate boards are more independent, both price and non-price loan terms (e.g., interest rates, collateral, covenants and performance pricing) are more favorable and syndicated loans comprise more lenders. In addition, board size, board diversity, audit committee structure and other director characteristics also influence bank loan price. However they do not consistently affect all non-price loan terms except for audit committee independence. Moreover, the impact of board independence on bank loans varies with borrower characteristics (e.g., leverage, tangibility and anti-takeover environments) and loan characteristics (e.g., loan types and loan structures). Overall, our study provides strong evidence that banks tend to recognize the benefits of board monitoring in mitigating agency risk and information risk, and reward borrowers with higher quality boards with more favorable loan contract terms.
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2009-11
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
CEI Working Paper Series ; No. 2009-08
Relation
Related Identifier
URI
  http://cei.ier.hit-u.ac.jp/English/index.html
NCID
AA11590659
Number of Pages
67
Appears in Collections
CEI Working Paper Series
URL
https://hdl.handle.net/10086/29227