Quotation Weiskirchner-Merten, Katrin. 2019. Bank Representatives on the Board of Directors and their Influence on the Firm's Investment Decision. 81. Jahrestagung des Verbands der Hochschullehrer für Betriebswirtschaft - VHB 2019, Rostock, Deutschland, 12.06.-14.06.


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Abstract

This paper examines the role of bank representatives on the firm’s board of directors and their influence on the firm’s big-scale lump-sum investment project. After the debt has been arranged, the bank representatives are inclined to lower the project risk, which is contrary to the shareholder’s interests of taking on more risk. However, higher risk increases the manager’s expected compensation. We use a one period discrete model to show that the bank representatives on the board can become beneficial from the shareholders’ perspective. This happens because the bank representatives on the board act as a commitment device for the board to implement less risk, which results in lower managerial expected compensation. The model predicts that shareholders benefit from bank representatives on the board of directors when they expect low project profitability.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title Bank Representatives on the Board of Directors and their Influence on the Firm's Investment Decision
Event 81. Jahrestagung des Verbands der Hochschullehrer für Betriebswirtschaft - VHB 2019
Year 2019
Date 12.06.-14.06.
Country Germany
Location Rostock
URL https://www.conftool.com/bwl2019/index.php?page=browseSessions&form_session=134

Associations

People
Weiskirchner-Merten, Katrin (Details)
Organization
Management Accounting and Control Group AB (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5307 Business and management economics (Details)
5327 Accounting (Details)
5359 Controlling (Details)
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