The Value of Independent Directors: Evidence from Sudden Deaths
We investigate the contributions of independent directors to shareholder value by examining the stock price reaction to an exogenous event: sudden deaths of directors. Compiling an extensive database of sudden deaths of directors in the U.S. from 1994 to 2007, we find that following the death of an independent director, the firm’s stock price drops by almost 1％ on average. For our control sample of inside and gray directors, we find no significant reaction to such events. The difference in abnormal returns following the sudden deaths of independent, gray and inside directors is statistically significant. Consistent with the view that independence is valuable, we find that stock prices react less negatively when the independent director is older, appointed to the board during the tenure of the current CEO, or when he has long board tenure. Our results hold when controlling for director-invariant heterogeneity (e.g. ability, experience, and skills) using a fixed-effect approach. Overall, our results demonstrate that independent directors provide a valuable service to shareholders.
Independent Director Sudden Death Firm Value Corporate Governance
Bang Dang Nguyen Kasper Meisner Nielsen
Chinese University of Hong Kong Chinese University of Hong Kong and CEBR
国际会议
广州
英文
1-33
2009-07-07（万方平台首次上网日期，不代表论文的发表时间）