Board characteristics and market power

I assess the extent to which board structure and composition affect market power. I focus on Italian listed banks over the period 2008-2022. I employ a two-stage procedure: I first estimate bank-level Lerner indices, then I regress these market power indicators on a set of variables related to board, bank-specific and macroeconomic characteristics. I find that market power is higher for banks with small and one-tier system boards characterized by low meeting frequency, few independent but more foreign members, relatively homogeneous officer age, and not very busy directors. Further, I show that the results are quite different when using accounting measures of bank performance, suggesting that estimating Lerner indices can improve the quality of information for banking regulators and policymakers.