In this paper, we present very interesting new findings on how bank difficulties can spill over to non-financial firms through common directors, rather than through the more commonly studied lending channel. Our evidence indicates that bank regulators’ enforcement actions create additional work for bank directors who spend more time involved in bank director duties at the expense of the other firms where they also serve on the board. We develop a new interesting measure of director meeting attendance, which has potentially broad application in the corporate finance and governance field. Therefore, the paper is interesting for both corporate governance and financial intermediation research.
Journal of Financial and Quantitative Analysis Acceptance