英文摘要 |
A board linkage may reduce the costs of information flows between the lender and borrower, however, the potential conflict of lender’s interest may generate when a bank executive is on the board of a non-financial firm. The fiduciary duty of directors to promote the interests of shareholders can lead to a conflict with the banker-director’s role as lender or potential lender due to different payoff structures of debt and equity. Hence, there are tradeoffs between the benefits from direct bank monitoring and the costs of active bank involvement in firm management. In this paper, we investigate the motivations and effects of banks to hold equity and participate in the boards of their borrowers. We utilize the agency and lenders’ conflict of interest hypotheses explaining why banks hold equity stakes of borrowing firms. The characteristics of the business in which banks are also shareholders and directors are examined. Moreover, we also analyze whether banker on non-financial firm’s board affect the terms of loan contract and explore the relations between the bank equity stakes and the loan terms of the borrowing firms. Firstly, the empirical results reveal that banks are more likely to enter the boards of the businesses with higher profitability, higher proportions of tangible assets, and higher public debt ratio in the whole sample and for large firms these results are more consistent with the lenders’ conflict of interest hypothesis. Secondly, in the sub-sample of small firms, banks tend to be on the boards of smaller size, and with higher proportion of liabilities from financial institutions, supporting agency costs hypothesis. Thirdly, firms with any banks on their boards receive more favorable loan terms, including lower spread rate and larger credit line. However, banks grant loans of lower size and more collateralized loans to the firms they are also on boards in order to alleviate the problems of lenders’ conflict of interest. |