Research Spotlight - Finance and Accounting, with Leonid Pugachev

Neglecting Peter to Fix Paul: How Board Interlocks Transmit Bank Shocks across Sectors
Abstract: We show that board interlocks transmit bank shocks into the real economy using a sample of 1,245 U.S. bank enforcement actions (EAs) between 1990 and 2017. When a non-financial firm (NFF) and bank share a common director, NFF stock prices decline around bank EA issue dates. The effect is stronger for more severe EAs. During enforcement years, interlocking directors reallocate resources, attending fewer NFF and more bank board meetings. Impaired credit relationships, director reputational damage, or endogenous director selection cannot fully explain our results. These findings imply that board interlocks could transmit larger bank shocks into the real economy.

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Видео Research Spotlight - Finance and Accounting, with Leonid Pugachev канала Saunders College of Business at RIT