Bank Executivess Outside Directorships and Career Outcomes

Abstract

We employ a unique sample of 5000 outside directorships held by German executive bank directors over 1993-2015 to examine whether these directorships proxy reputational capital and/or bankers’ private information. We exploit various circumstances of executive directors’ appointments and bank performance with bank-fixed-effect and difference-in-differences estimations to show that outside directorships enhance value for the bank and improve executives’ career outcomes, mostly because these posts signal good managerial ability and access to valuable private information about clients. Overall, our results suggest that bankers’ outside directorships have a dual role in the German corporate governance system.