Travis R. Davidson

We examine the impact of religiosity on credit union member benefits and document a positive association between local religiosity and member benefits. Members of credit unions in more religious counties enjoy lower interest rates on loans, higher interest rates on deposits, and consequently lower interest spreads. The effect varies by credit union types, and results suggest a stronger association between religiosity and member benefits for credit unions with a narrower field of membership. Further analysis indicates local religiosity is associated with improved operating performance, lower non-interest expenses, and higher quality earning assets, but increased liquidity risk. The results are robust to various model specifications, subsamples, and economic conditions.

We investigate how board busyness affects corporate payout policies. We find that board busyness increases the propensity and the level of cash distribution to shareholders. The likelihood and the level of share repurchases increase with inside director busyness, while the propensity to pay dividends and the level of dividends increase with independent director busyness. Further analysis shows that SOX and the Jobs and Growth Tax Relief Reconciliation Act do not alter the positive association between busy independent directors and the likelihood of paying dividends, nor do these regulations change busy inside directors’ preference for repurchases.

The use of bank‐owned life insurance (BOLI) has more than tripled since 2001 and has caught the attention of the Office of the Comptroller of the Currency. I find increases in BOLI lead to higher levels of liquidity risk, credit risk, and interest rate risk. Robustness tests confirm these results and suggest over‐ and underinvestment in BOLI and use of BOLI as a tax shelter contribute to risk increases. Results indicate that the concerns expressed by regulators are warranted, and suggest insurance may not always have the intended effect of reducing firm risk because of unintended consequences or misuse.

Key employee life insurance in the banking industry is called bank‐owned life insurance (BOLI). Banks use BOLI to provide financial support to help reduce disruptions due to the death of a key executive and as a part of the executive compensation package. We investigate the characteristics of banks related to the amount of BOLI purchased. We find that BOLI purchases are positively related to bank size and leverage and negatively related to tax rates and employee salaries. We also find that BOLI purchases are related to bank ownership structure and profitability.