FINANCIAL EXPERTS ON THE BOARD: DOES IT MATTER FOR THE PROFITABILITY AND RISK OF THE UK BANKING INDUSTRY?

In this article, I explore the relation among board-level financial expertise, profitability, and risk with panel data from the U.K. banking industry. The empirical findings document that collectively, financial experts have a positive influence on the performance of banks; contribute to higher risks, especially for large banks; and improve the stock performance of banks. Moreover, the results highlight that board-level qualified accountants have no statistical effect on profitability, whereas financial and banking professors, as well as financial experts from other industries, have a positive effect. Such findings imply that these two groups of professional financial experts may more easily adopt group-level profit enhancements. Robustness checks confirm the results for all types of banking institutions, except those with strong real estate portfolios. Finally, certain commercial and/or policy implications of the results are reported.