NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by A. Burak Guner

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Working Papers

January 2006Financial Expertise of Directors
with Ulrike Malmendier, Geoffrey Tate: w11914
The composition and functioning of corporate boards is at the core of the academic and policy debate on optimal corporate governance. But does board composition matter for corporate decisions? In this paper, we analyze the role of financial experts on boards. In a novel panel data set on board composition, we find that financial experts significantly affect corporate decisions, though not necessarily in the interest of shareholders. First, when commercial bankers join boards, external funding increases and investment-cash flow sensitivity diminishes. But, the increased financing affects mostly firms with good credit and poor investment opportunities. Second, investment bankers on the board are associated with larger bond issues, but also worse acquisitions. Third, we find little evidence t...

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