The proportion of Outsiders on the board  (Adams, 2012)
 
We consider a director to be ‘‘an insider’’ if he works for the firm and ‘‘affiliated’’ if he has had any previous business relationship with the firm or family relationship with its officers  (Renée B. Adams and Hamid Mehran, 2012)
 
 
 
The independent director is defined as ‘‘such director that has no other position in commercial banks, nor has any relation with the commercial bank or major shareholders it serves that may adversely affect his/her making independent and disinterested judgment (Liang, Xu & Jiraporn, 2013)
 
a director is not an outsider if he was an officer or had any business relationship with the BHC in any of the 14 years of the sample. (Adams & Mehran, 2012). In contrast, most cross-sectional studies can only classify directors based on current employee status or business relationships
 
Directors that are currently employed by the firm, retired employees of the firm, related company officers or immediate family members of firm employees are classified as executives. Non-executive directors are members of the Board who are not top executives, retired executives, former executives, relatives of the CEO or the chairperson of the Board, or outside corporate lawyers employed by the firm at any point during our sample period. Moreover, with respect to banks that adopt the two-tier
system, the assumption made is that the directors that belong to the supervisory
Board perform as non-executives ( (Panagiotis et al, 2007)
 
 
The fourth variable we collect data on is board independence as measured by the percentage of independent outside directors on the board of directors (Board independence). We define independent directors as directors without any relation with the company except for their board seat. Hence, we classify directors with prior executive function, with a family relationship with an executive officer of the bank, or with any other business ties, such as for example lawyers or consultants doing other work for the bank as non-independent (or ‘‘gray’’) directors. (Aebi, 2012)