Workshop Series: Katrina Ellis
Abstract: Interconnectedness, or the 'too connected to fail' phenomenon has been used to explain the severity of the recent global financial crisis (GFC). Realising that the traditional linear approach to assessing risk is not sufficient, many firms are shifting their attention towards understanding how they are related to other firms. One method by which researchers are examining this is by establishing links between firms based on director connections. In this paper we add to this growing body of literature. We ask the question of whether financial institutions that received capital infusions under the Troubled Asset Relief Program (TARP) had less independent boards, after accounting for director connections, than other institutions (financial and non-financial). Our results provide strong evidence that this was the case. Specifically, TARP banks as we refer to them, had more independent boards prior to accounting for director connections, but less independent boards after accounting for concurrent and historic connections. Further examination into whether this relationship has any bearing on weak corporate governance is needed.
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Katrina Ellis is the Head of Research at the Australian Prudential Regulation Authority (APRA). Her expertise is in empirical financial economics research both in an academic setting and at APRA. Prior to joining APRA in 2008 Katrina was an Associate Professor of Finance at the Graduate School of Management at the University of California Davis. She did her undergraduate degree in mathematics from Adelaide University and then received a PhD in Finance from Cornell University in 2000.