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The effects of financial distress and capital structure on the work effort of outside directors

  • Chou, Hsin-I
  • Li, Hui
  • Yin, Xiangkang

This paper investigates the conflict of interests between shareholders and debtholders by examining the work effort of outside directors when a company experiences financial distress or has a high financial leverage. We find that at both company level and individual director level: (i) outside directors of a firm with higher financial distress exert less work effort in controlling for financial leverage; (ii) outside directors of a firm with a higher financial leverage work harder controlling for financial distress.

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Article provided by Elsevier in its journal Journal of Empirical Finance.

Volume (Year): 17 (2010)
Issue (Month): 3 (June)
Pages: 300-312

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Handle: RePEc:eee:empfin:v:17:y:2010:i:3:p:300-312
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