Corporate boards and bank loan contracting

Bill Francis, Iftekhar Hasan, Michael Koetter, Qiang Wu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

36 Citations (Scopus)

Abstract

We investigate the role of corporate boards in bank loan contracting. We find that when corporate boards are more independent, both price and nonprice loan terms (e.g., interest rates, collateral, covenants, and performance-pricing provisions) are more favorable, and syndicated loans comprise more lenders. In addition, board size, audit committee structure, and other board characteristics influence bank loan prices. However, they do not consistently affect all nonprice loan terms except for audit committee independence. Our study provides strong evidence that banks recognize the benefits of board monitoring in mitigating information risk ex ante and controlling agency risk ex post, and they reward higher quality boards with more favorable loan contract terms.

Original languageEnglish
Pages (from-to)521-552
Number of pages32
JournalJournal of Financial Research
Volume35
Issue number4
DOIs
Publication statusPublished - Dec 2012
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance

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