We examine the relationship between outcomes of securities fraud class action lawsuits and board turnover rates. Our results indicate that the outcome of a class action is a good indicator of the underlying, unobservable merit of the action. Consistent with the merit hypothesis, board turnover rates are higher in the period following the filing of a lawsuit that is ultimately settled than one that is dismissed. Turnover propensities are more sensitive to outcome for CEOs and for individuals named as defendants in the lawsuits. Turnover rates of both inside and outside directors are higher when external equity ownership is more concentrated.
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Length: 48 pages Date of creation: 28 Apr 2007 Date of revision:
02 Jan 2008 Handle: RePEc:boc:bocoec:664
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Find related papers by JEL classification: G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure K22 - Law and Economics - - Regulation and Business Law - - - Corporation and Securities Law
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