Bank Board Structure and Loan Syndication

Abstract

We study the impact of bank board structure on loan syndication and find both monitoring quality and connections of the lead bank’s board have a positive effect on three measures of the ability to syndicate a larger portion of a loan. Board monitoring quality plays a more dominant role during the financial crisis and following a negative reputation shock to the lead arranger. Board member connectedness is dominant for lower reputation lead arrangers. Our results are robust to an instrumental variable approach for endogeneity. Overall, we conclude that lead arranger board quality serves as a credible signal to participant banks.