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)

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Summary

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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