The Effects of Financial Distress and Capital Structure on the Work Effort of Outside Directors
37 Pages Posted: 12 Jan 2010 Last revised: 4 Mar 2011
Date Written: January 12, 2010
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 work less hard controlling for financial leverage; (ii) outside directors of a firm with a higher financial leverage work harder controlling for financial distress.
Keywords: Work effort, Outside director, Financial distress, Financial Leverage, Board meeting
JEL Classification: G30
Suggested Citation: Suggested Citation