The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The Outreach & Education function engages, empowers and educates the public in the Second District. Our outreach mission furthers the Bank’s commitment to the region by listening to the communities we serve and developing programs, analysis and sponsored conferences and clinics to help meet their needs. Our education mission aims to advance public knowledge about the Federal Reserve System and its role in the economy.
The subprime crisis highlights how little we know about bank governance. This paper addresses a long-standing gap in the literature by analyzing the relationship between board governance and performance using a sample of banking firm data that span thirty-four years. We find that board independence is not related to performance, as measured by a proxy for Tobin’s Q. However, board size is positively related to performance. Our results are not driven by M&A activity. But we provide new evidence that increases in board size due to additions of directors with subsidiary directorships may add value as bank holding company complexity increases. We conclude that governance regulation should take unique features of bank governance into account.