Does personal liability deter individuals from serving as independent directors?

• 成果类型: Article
• 署名作者: Naaraayanan, S. Lakshmi; Nielsen, Kasper Meisner
• 署名单位: University of London; London Business School; Copenhagen Business School
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.01.003
• 发表日期: 2021
• 关键词: Independent directors; reputation; ACCOUNTABILITY; Personal liability; Director incentives

摘要

This study examines whether personal liability for corporate malfeasance deters individuals from serving as independent directors. After the introduction of personal liability in India, we find that individuals are deterred from serving on corporate boards. We find stronger deterrence among firms with greater litigation and regulatory risk, higher monitoring costs, and weak monetary incentives. Expert directors are more likely to exit, resulting in 1.16% lower firm value. We further evaluate whether contemporaneous corporate governance reforms and market developments contribute to this deterrence. Overall, our results suggest that personal liability deters individuals with high reputational costs from serving as independent directors. (C) 2021 Elsevier B.V. All rights reserved.