Disciplinary directors: Evidence from the appointments of outside directors who have fired CEOs
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By examining board appointments of outside directors who have previously fired a CEO, we study how directors’ willingness to take disciplinary actions is related to a firm's performance and risk-taking. Such directors (‘disciplinary directors’) appear to benefit firms with weak monitoring, but hurt firms in innovative industries. Firms appointing a disciplinary director subsequently exhibit lower idiosyncratic risk, leverage, and R&D expense, make fewer acquisitions, and are more likely to replace poorly performing CEOs. Overall, disciplinary directors appear to influence managerial behavior and shareholder wealth.
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Jay Cai, Tu Nguyen (2018). Disciplinary directors: Evidence from the appointments of outside directors who have fired CEOs. UWSpace. http://hdl.handle.net/10012/14048
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