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Disciplinary directors: Evidence from the appointments of outside directors who have fired CEOs

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1-s2.0-S0378426618301997-main.pdf (1.08 MB)

Date

2018-11-01

Authors

Cai, Jay
Nguyen, Tu

Journal Title

Journal ISSN

Volume Title

Publisher

Elsevier

Abstract

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.

Description

The final publication is available at Elsevier via https://dx.doi.org/10.1016/j.jbankfin.2018.09.012 © 2018. This manuscript version is made available under the CC-BY-NC-ND 4.0 license https://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

Board of directors, CEO turnover, Director reputation, Disciplinary effects, Risk-taking

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Citation

URI

https://dx.doi.org/10.1016/j.jbankfin.2018.09.012
 http://hdl.handle.net/10012/14048

Collections

Waterloo Research
Accounting and Finance