Are outside directors with greater board tenure valuable? Evidence from the last credit crisis

Analyses of bank performance around the 2007–2008 financial crisis indicate that outside directors with financial experience acquired through longer board service at their own banks are more effective than those with financial experience acquired elsewhere. Institutions with more long-tenured indepe...

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Bibliographic Details
Published in:Journal of accounting and public policy 2023-01, Vol.42 (1), p.107037, Article 107037
Main Authors: Fernandes, Nuno, Fich, Eliezer M.
Format: Article
Language:English
Subjects:
Banking
Corporate governance
Credit
Economic crisis
Financial institutions
Outside directors
TARP funds
Tenure
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Summary:Analyses of bank performance around the 2007–2008 financial crisis indicate that outside directors with financial experience acquired through longer board service at their own banks are more effective than those with financial experience acquired elsewhere. Institutions with more long-tenured independent directors (i) earn higher Cumulative Abnormal Returns (CARs) around the collapse of both Bear Stearns and Lehman Brothers, (ii) limit their risk exposure before the crisis, (iii) exhibit better stock return and accounting performance during the crisis, (iv) are less likely to be bailed out by the U.S. government’s Troubled Assets Relief Program (TARP), and (v) receive proportionally less financial assistance from TARP.
ISSN:0278-4254
1873-2070
DOI:10.1016/j.jaccpubpol.2022.107037