The certification role of bank directors on;corporate boards

Giacomo Cau () and Massimiliano Stacchini
Additional contact information
Giacomo Cau: Banca d'Italia
Massimiliano Stacchini: Banca d'Italia, Economics and International Relations Area

No 46, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: There is a large literature on the effects of the presence of bankers on firms'boards as these bankers may reduce monitoring costs by facilitating information flows between the lender and the borrower, may credibly certify the financial soundness of the firm to other creditors who are not represented in the board and may act as financial experts for the management. At the same time, lending bankers on boards may have a conflict of interests. In this paper, we study the impact of the presence of bankers on firms' boards on interest rates charged to firms. We have two results.;First, as interest rates on loans from the board director's bank and from other banks are very similar we do not find evidence of a conflict of interests effect. Second, we have strong evidence of certification effects played by bank directors as rates charged by all banks on loans to firms with bankers on boards are lower than those charged by all banks to firms without bankers. The certification effect is even stronger if the banker on board has itself loaned to the firm.

Pages: 30
Date: 2010-11
New Economics Papers: this item is included in nep-ban and nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://docs.dises.univpm.it/web/quaderni/pdfmofir/Mofir046.pdf First version, 2010 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:anc:wmofir:46

Access Statistics for this paper

More papers in Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Maurizio Mariotti ().