Endogenously chosen board structure: Evidence from the US bank holding companies

This paper examines the trends and endogenous formation of bank board structure (size, independence, CEO duality and gender diversity) for a sample of 212 bank holding companies from 1997 to 2004. Overall, the results show that the costs and benefits of boards monitoring and advising roles could explain bank board structure with caveats. For example, due to regulatory nature and comparatively intensive scrutiny of bank directors, I argue that bank managers may have less control over the directors’ selection process. Thus, bank board independence may not be the outcome of negotiation with CEOs. Consistent with this view, I find that bank CEOs do not effect bank board independence. The trend analysis also provides some important results. For example, in contrast to corporate firm evidence, I find that board size fell over the sample period for large and medium banks while board size was relatively flat for small banks. The results are robust to different estimation specifications. These results have important policy implications for bank regulators and investors.