Do Banks Price Independent Directors’ Attention?

Henry He Huang, Gerald J. Lobo, Chong Wang, Jian Zhou

Research output: Journal article publicationJournal articleAcademic researchpeer-review

14 Citations (Scopus)


Masulis and Mobbs (2014), (2015) find that independent directors with multiple directorships allocate their monitoring efforts unequally based on a directorship's relative prestige. We investigate whether bank loan contract terms reflect such unequal allocation of directors' monitoring effort. We find that bank loans of firms with a greater proportion of independent directors for whom the board is among their most prestigious have lower spreads, longer maturities, fewer covenants, lower syndicate concentration, lower likelihood of collateral requirement, lower annual loan fees, and higher bond ratings. Our evidence indicates that independent directors' attention is associated with lower cost of borrowing.

Original languageEnglish
Pages (from-to)1755-1780
Number of pages26
JournalJournal of Financial and Quantitative Analysis
Issue number4
Publication statusPublished - 1 Aug 2018

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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