Public debt financing, ownership structures and bankers on boards: evidence from Japan

Abstract

This article provides new insights on determinants that affect the allocation of bankers to firm boards by focusing on the benefits and costs they bring to the boards. Using data on Japanese firms during the period 2003-2007, we find that firms with lower credit ratings have higher proportions of bankers on their boards to gain easier access to bank credit. In contrast, firms with large shareholders face potential costs arising from conflicts of interest between large shareholders and banks, and accept fewer bankers on their boards. The results indicate that availability of public debt financing and ownership structures are important factors affecting the allocation of bankers to firm boards.

Acknowledgement

I thank Kazuo Ogawa for valuable comments and suggestions. All errors remain my own responsibility.

Notes

¹In the United States, bankers face potential costs arising from conflicts of interest between bankers and shareholders and lender liability (Kroszner and Strahan, 2001).

² Extreme observations are defined as those for which any one of the variables has a value more than four standard deviations away from the mean value.