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In Lombard we trust: The value of independent celebrity directors

Author

Listed:
  • Cardow, Andrew
  • Wilson, Willam

Abstract

Purpose –This paper addresses corporate governance issues around the use of celebrity independent directors in closely held financial institutions. Design/methodology/approach – The authors employ the failure of Lombard Finance, a closely held New Zealand finance company to illustrate the agency conflict between directors, who were nominally independent, and outside debt holders. This approach is taken as New Zealand finance companies were unique in that they are predominantly closely held bank like firms who sourced the bulk of their funds from retail fixed term deposits. Findings The research highlights the conflict inherent when utilising independent celebrity directors as spokespeople for closely held finance companies in a small loosely regulated market. Originality/value This research contributes to the discussion surrounding independent celebrity directors and their influence in the collapse of closely held finance companies at a particular time in recent history.

Suggested Citation

  • Cardow, Andrew & Wilson, Willam, 2014. "In Lombard we trust: The value of independent celebrity directors," MPRA Paper 58111, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:58111
    as

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    References listed on IDEAS

    as
    1. Udi Hoitash, 2011. "Should Independent Board Members with Social Ties to Management Disqualify Themselves from Serving on the Board?," Journal of Business Ethics, Springer, vol. 99(3), pages 399-423, March.
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    More about this item

    Keywords

    Independent directors; finance companies New Zealand;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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