Board Characteristics and Their Determinants: Did Board Characteristics of U.S Commercial Banks Change from 2008 to 2013?

Abstract

Corporate governance of banks has been studied in detail and this thesis will be a contribution to that literature. The main aim of this thesis is to study boards of directors of U.S. commercial banks and test what variables affect their composition, and determine if their structure changed between the years 2008 and 2013. The main driver is the hypothesis that something changed in board structure after the credit crisis.
The data used is information on board and director characteristics and financial information for 29 U.S. commercial banks. The hypotheses formed are tested using t-tests and linear- and probit panel regressions, including robustness checks. The first tests done are t-tests where most characteristic changes were statistically non-significant, except for director age and their experience in finance and accounting, and director stock awards. Empirical analysis on variables affecting board size, independence, and CEO duality did not yield much support for the hypotheses that were formed. In the main analysis the only hypotheses that received any support were that board independence increases with director experience, when director experience is measured as the fraction of directors with experience as CEOs, and the hypothesis that the probability of CEO duality increases with the CEOs tenure (at the 10% confidence level). These results were further supported in the robustness checks and the latter hypothesis even got stronger support where the variable for CEO tenure was significant at the 5% confidence level. Furthermore, the year dummy variable was statistically non- significant in all regressions, indicating that there were no changes in these board characteristics between the two years, as the t-test results indicated.