Abstract
This study explores the impact of independent bank directors' financial industry expertise on the effectivenenss of board functioning by investigating bank performance following a CEO turnover. Empirical results show that following a forced CEO turnover, independent financial industry expertise improves bank performance while decreases bank risk-taking. This is likely because industry-specific expertise enhances boards’ ability to locate a superior successor CEO and to monitor and advise the new management following a forced CEO turnover. The market reaction to the announcements of a forced bank CEO turnover tends to be consistent with this view.
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