Governance and the Financial Crisis

Should boards of financial firms be blamed for the financial crisis' Using a large sample of data on nonfinancial and financial firms for the period 1996-2007, I document that the governance of financial firms is, on average, not obviously worse than in nonfinancial firms. Even the issue of executive compensation is not as clear cut as suggested by the media. I also document that bank directors earned significantly less compensation than their counterparts in nonfinancial firms and banks receiving bailout money had boards that were more independent than in other banks. I discuss implications of these findings.