Do independent director departures predict future bad events?

Do independent director departures predict future bad events?

Angie Low, René Stulz

Series number :

Serial Number: 
281/2010

Date posted :

December 01 2015

Last revised :

May 12 2010
SSRN Share

Keywords

  • Director departures • 
  • reputational concerns • 
  • director monitoring

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 departures. 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.

Authors

Real name:
Angie Low