pp. 655-684

Examination of resource exchanges between individual firms is often essential to test theories of interorganizational networks. Using previously unavailable data on bank loans to US nonfinancial corporations from 1938 through 1941, this paper examines for the first time with US data the relation between bank loans and board representation. Although most nonfinancial corporations have bank officers on their boards, fewer than half of these ties represent lending banks. Drawing on the resource dependence perspective, political sociology, and agency theory, we develop a model to predict the conditions under which the bankers on a firm’s board represent the firm’s lenders. Loans are most likely to be accompanied by board representation when the amounts are large and the firm’s profits are low. This suggests that board representation is a means employed by banks to monitor their loans under high-risk conditions.