Abstract
This study investigates whether independent directors who are valued by their firms enhance firm performance. We develop improved metrics to build on the new notion of board hierarchy to explore this question with evidence from China’s commercial banks. Our results show strong support for our proposition that independent directors, as reflected by their board hierarchy ranking, do matter in their effectiveness as directors and in bank performance. We also find discernible differences in board hierarchy patterns and performance outcomes between the newly emerged and more numerous city commercial banks and the group of large and predominantly state-owned banks.
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