Following surprise independent director departures, affected firms have worse stock and
operating performance, are more likely to restate earnings, face shareholder litigation,
suffer from an extreme negative return event, and make worse mergers and acquisitions.
The announcement returns to surprise director departures are negative, suggesting that
the market infers bad news from surprise departur
es. We use exogenous variation in
independent director departures triggered by director deaths to test whether surprise
independent director departures cause these negative outcomes or whether an anticipation of negative outcomes is responsible for the surprise director departure. Our evidence is more consistent with the latter.