Do Independent Director Departures Predict Future Bad Events?

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CFA Digest
December 2017 | Vol. 47 | No. 12
Source: CFA Institute
Rüdiger Fahlenbrach Angie Low René M. Stulz
Gregory G. Gocek, CFA (Reviewer)



After an independent director resigns unexpectedly, the affected firm is more likely to experience worse stock and operating performance and suffer negative announcement returns. A test for the direction of this effect’s causality shows that directors leave in anticipation of adverse events rather than the departures themselves causing the negative outcomes.

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