• We wish to express our sincere thanks and gratitude toward the anonymous referee and the editor (Jayant Kale) whose comments and suggestions significantly improved the paper. We would also like to thank Steven Dennis, Philip Strahan, and participants of seminars at Rensselaer Polytechnic Institute, University of Groningen, Bank of Finland, and Midwest Financial Management Association annual meeting (February 2009) for helpful comments and insights.


We investigate the role of corporate boards in bank loan contracting. We find that when corporate boards are more independent, both price and nonprice loan terms (e.g., interest rates, collateral, covenants, and performance-pricing provisions) are more favorable, and syndicated loans comprise more lenders. In addition, board size, audit committee structure, and other board characteristics influence bank loan prices. However, they do not consistently affect all nonprice loan terms except for audit committee independence. Our study provides strong evidence that banks recognize the benefits of board monitoring in mitigating information risk ex ante and controlling agency risk ex post, and they reward higher quality boards with more favorable loan contract terms.