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Leaving before bad times: Does the labor market penalize preemptive director resignations?

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  • Dou, Ying

Abstract

When firms experience negative events such as lawsuits or earnings restatements, their directors also suffer. But what about those who leave shortly before the events? I show that directors who leave prior to negative events experience greater declines in the number of their directorships than directors who stay through the events, but smaller declines than directors who leave after the events. These declines do not appear to be voluntary or driven by forced departures. Instead, they appear to be the results of labor market penalties. The results suggest that resigning pre-emptively does not protect directors from labor market penalties.

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  • Dou, Ying, 2017. "Leaving before bad times: Does the labor market penalize preemptive director resignations?," Journal of Accounting and Economics, Elsevier, vol. 63(2), pages 161-178.
    • Handle: RePEc:eee:jaecon:v:63:y:2017:i:2:p:161-178
    DOI: 10.1016/j.jacceco.2017.02.002
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    Cited by:

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    4. Lel, Ugur & Miller, Darius, 2019. "The labor market for directors and externalities in corporate governance: Evidence from the international labor market," Journal of Accounting and Economics, Elsevier, vol. 68(1).
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    6. Haw, In-Mu & Song, Byron Y. & Tan, Weiqiang & Wang, Wenming, 2021. "Bankruptcy, overlapping directors, and bank loan pricing," Journal of Corporate Finance, Elsevier, vol. 71(C).
    7. Kim, Hyemin & Fahlenbrach, Rüdiger & Low, Angie, 2023. "CEO networks and the labor market for directors," Journal of Empirical Finance, Elsevier, vol. 70(C), pages 1-21.
    8. Kuang, Yu Flora & Qin, Bo & Yang, Xing, 2023. "We are under attack: Terrorist attacks and director turnover," The British Accounting Review, Elsevier, vol. 55(5).
    9. Quinn D. Curtis & Justin J. Hopkins, 2022. "Career concerns for revealing misreporting," Review of Accounting Studies, Springer, vol. 27(1), pages 1-34, March.
    10. Amore, Mario Daniele & Marzano, Riccardo, 2019. "Family Ownership and Antitrust Violations," CEPR Discussion Papers 14018, C.E.P.R. Discussion Papers.
    11. Chen, Chen & Dou, Ying & Kuang, Yu Flora & Naiker, Vic, 2023. "Do professional ties enhance board seat prospects of independent directors with tainted reputations?," Journal of Banking & Finance, Elsevier, vol. 154(C).

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    More about this item

    Keywords

    Director departures; Reputational concerns; Board seats; Labor market settling-up;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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