The Effect of Board Strength on Managerial Persistence: A Longitudinal Study of Problem Loans

David E. Olson


Agency theory adopts the assumptions that management pursues self-interest over that of owners and that boards are necessary to
oversee this relationship and align these interests. However, if the assumption is that people are self-interested, the theory should apply to
members of the board as well as management. This paper extends agency to the board by reviewing the effects of board composition on loan
losses in banks.

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