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.
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Economic Education improves public knowledge about the Federal Reserve System, monetary policy implementation, and promoting financial stability through the Museum and programs for K-16 students and educators, and the community.
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.