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6 in the literature the impact of board size on board

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6In the literature, the impact of board size on board effectiveness is still ambiguous. Onone hand, Yermack (1996) finds a negative relation between board size and firm performance.On the other hand, the resource dependency theory views that larger boards should be moreeffective than smaller boards, as larger boards bring diverse resources, such as information, skills,and legitimacy, to help larger boards make better collective decisions (e.g., Hillman, Cannella,and Paetzold 2000). Our result seems in line with the resource dependency argument, and it isalso consistent with Anderson, Mansi, and Reeb (2004), which find a negative relation betweenboard size and the cost of public debt.In column 3, we test the duality effect on the loan price using a binary variable, Dummy(Board duality), which equals 1 if the CEO is also the chairman of a board and 0 otherwise.Unlike the results for board independence and board size, the insignificant coefficient impliesthat board duality has no effect on bank loan price.6The results hold when we use alternative measures of board independence and board size, such as absolutenumbers of outside directors and board size to firm size ratio.
16In column 4, we specify three main traits of board structure,Board Composition,Log(Board size),andDummy (Board duality), in one regression simultaneously. We find thatBoardCompositionandLog(Board size)are still negatively associated with bank loan price, andDummy (Board duality)is insignificantly related to bank loan price. Overall, Table 2 indicatesthat independent and large boards are more effective, leading to lower interest rates on bankloans.In terms of control variables, we find a significantly negative relation betweenDummy(Bank)and bank loan price, indicating that firms with bankers on their boards enjoy lower loancosts. We also find thatLog (Assets),Tangibility,Profitability,andZ-scoreare all significantlynegatively related to the loan spread, butLeverageis positively related to the loan spread. Allthese results are consistent with our expectations and prior studies.With regard to loan characteristics, we find thatLog (Facility)is negatively related toloan spread, butLog (Maturity)andRatingare positively related to the loan spread. Those resultsare consistent with our expectations and with prior findings, such as those of Qian and Strahan(2007) and Graham, Li, and Qiu (2008). In terms of the effect of existing client relationships, wefind thatPrior relationsis significantly positively associated with bank loan price. This supportsthe lock-up conjecture of banking relationships (Sharpe 1990; Rajan 1992) that predicts theextraction of rents over the course of the bank–firm relationship.Audit Committee Structure, Other Board Characteristics, and Bank Loan Price.Becauseof the importance of the audit committee in monitoring the financial-reporting process andproviding credible financial information to banks, we examine next the relation between auditcommittee structure and bank loan price. In column 1 of Table 3, we use the following proxies tomeasure the audit committee structure:Audit compositionis the percentage of outside directors

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