Board Independence and Corporate Governance: Evidence from Director Resignations

24 Pages Posted: 27 Apr 2009

See all articles by Manu Gupta

Manu Gupta

Virginia Commonwealth University (VCU) - Department of Finance, Insurance & Real Estate

Paige Fields

University of Kansas

Date Written: 2008-07

Abstract

As is evident from recent changes in NYSE and NASDAQ listing requirements, board independence is assumed to be an important and effective governance mechanism. However, the empirical evidence regarding the value of board independence is mixed. We examine board member resignation announcements and their perceived importance in the context of firms' existing governance structures. We find that outside director resignations appear to send negative signals to market participants. However, this market reaction is less negative when the board is more independent before the departure and when institutional ownership is high, but is more negative for higher levels of officer and director ownership and CEO incentive compensation.

Suggested Citation

Gupta, Manu and Fields, Paige, Board Independence and Corporate Governance: Evidence from Director Resignations (2008-07). Journal of Business Finance & Accounting, Vol. 36, Issue 1-2, pp. 161-184, January/March 2009. Available at SSRN: https://ssrn.com/abstract=1378258 or http://dx.doi.org/10.1111/j.1468-5957.2008.02113.x

Manu Gupta

Virginia Commonwealth University (VCU) - Department of Finance, Insurance & Real Estate ( email )

Richmond, VA 23284
United States

Paige Fields

University of Kansas ( email )

1654 Naismith Dr.
Lawrence, KS 66045
United States

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