Do directors face consequences for their poor performance? We examine this question in Do Outside Directors Face Labor Market Consequences? A Natural Experiment from the Financial Crisis, a draft of which we recently posted to the SSRN.
We theorize that the exogenous shock of the financial crisis made shareholders and regulators particularly attuned to financial firm performance. We thus use the financial crisis as a natural experiment to study labor market consequences for outside directors at banks and other financial companies. In particular, we explore the question of whether shareholders and regulators acted to penalize directors for poor firm performance during the financial crisis.
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