Secretive companies might resist it but appointing independent board members will help firms get their hands on more credit from banks, according to a new study from Warwick Business School. A strong, independent board brought discipline to how a company spent its cash and could help with cash flow, the study, which surveyed 1,300 US firms between 1996 and 2009, found. Banks must come up with their own methods of reining in corporate borrowers that do not prove to have a high level of internal control over spending practices. That often means the banks want to be repaid in a shorter amount of time, in the hope of putting pressure on the borrower. "Without an independent and strong board overseeing the [chief executive], lenders have used short-term debt as a potent controlling tool to keep them in check," said the study, led by Warwick assistant professor Onur Tosun. The Sarbanes-Oxley Act, which required companies to have a majority of independent members on their boards, was passed in the United States in 2003. The study looked at the changes to the maturity of debt before and after the passage of the act. During the first six years, board independence increased by 2 per cent, hitting 48 per cent in 2002. After the Sarbanes-Oxley Act was passed, independence soared to 65 per cent and eventually reached 78 per cent in 2009. The amount of short-term debt banks extended to the companies surveyed showed a significant decline after the first six years. Over the first period, short-term debt ratio climbed from 35 per cent to 38 per cent. Once the act was passed, it fell rapidly to 31 per cent. "The maturity structure of debt can substitute strong corporate governance, or vice versa, in terms of managerial control. When one increases, the other can decrease," Tosun said in the report. "In the presence of a powerful board with efficient control of the firm, lenders don't necessarily have to restrict themselves to short-term debt as monitoring the management is done by that strong independent board. Consequently, lenders may become more willing to issue longer-term debt as firms have more independent and stronger boards."