Board Financial Expertise and the Capital Decisions of US Banks

Gilani, U.; Keasey, K.; Vallascas, F.

Abstract

We examine whether increasing financial expertise among independent directors facilitates bank capital decisions that promote financial stability. We find US banks with more financial expert independent directors opt for higher target capital ratios and adjust faster their capital structure when they are below the target. We provide evidence suggesting that our results are driven by the skill-set of these directors that lead to a better understanding of bank risks and access to external recapitalization choices. Our findings are further amplified by an increase in the exposure to losses of financial expert directors and by exogenous increases in regulatory scrutiny.

Citation

Gilani, U., Keasey, K., & Vallascas, F. (2021). Board Financial Expertise and the Capital Decisions of US Banks. Journal of Corporate Finance, 71, Article 102091. https://doi.org/10.1016/j.jcorpfin.2021.102091

• Journal Article Type: Article
• Acceptance Date: Aug 31, 2021
• Online Publication Date: Sep 3, 2021
• Publication Date: 2021-12
• Deposit Date: Sep 1, 2021
• Publicly Available Date: Sep 4, 2023
• Journal: Journal of Corporate Finance
• Print ISSN: 0929-1199
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 71
• Article Number: 102091
• DOI: https://doi.org/10.1016/j.jcorpfin.2021.102091
• Public URL: https://durham-repository.worktribe.com/output/1236073