The Dark Side of Outside Directors: Do They Quit When They Are Most Needed?

Ruediger Fahlenbrach, Angie Low and René Stulz
Additional contact information
Angie Low: Nanyang Technological University

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Outside directors have incentives to resign to protect their reputation or to avoid an increase in their workload when they anticipate that the firm on whose board they sit will perform poorly or disclose adverse news. We call these incentives the dark side of outside directors. We find strong support for the existence of this dark side. Following surprise director departures, affected firms have worse stock and operating performance, are more likely to suffer from an extreme negative return event, are more likely to restate earnings, and have a higher likelihood of being named in a federal class action securities fraud lawsuit.

JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2010-03
New Economics Papers: this item is included in nep-bec and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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Related works:
Working Paper: The Dark Side of Outside Directors: Do they Quit When They are Most Needed? (2010)
Working Paper: The dark side of outside directors: Do they quit when they are most needed? (2010)
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