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Corporate Board Turnover and Securities Fraud Litigation: Some new evidence from case outcomes

Listed author(s):
  • Christopher F. Baum


    (Boston College
    DIW Berlin)

  • James G. Bohn

    (Federal Reserve Bank of Boston)

  • Atreya Chakraborty


    (University of Massachusetts-Boston)

We examine the relationship between outcomes of securities fraud class action lawsuits (SFCAs) and corporate board turnover rates. Our results indicate the strength of the allegations in lawsuits affects board turnover. The turnover rates for each type of board member: outsiders, insiders, and CEOs are higher when a lawsuit is settled relative to those that are dismissed. Turnover rates of outside directors are more sensitive to the outcome of the SFCA among firms with higher levels of external blockholdings and those with greater institutional ownership. These results support the view that firms act to impose sanctions on those individuals associated with fraudulent activities.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 664.

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Date of creation: 28 Apr 2007
Date of revision: 31 May 2016
Publication status: published 2016, International Review of Law and Economics, 48, 14-25
Handle: RePEc:boc:bocoec:664
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