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Publications
Publications
  • 2013
  • Working Paper

Accountability of Independent Directors—Evidence from Firms Subject to Securities Litigation

By: Francois Brochet and Suraj Srinivasan
  • Format:Print
  • | Language:English
  • | Pages:59
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Abstract

We examine which independent directors are held accountable when investors sue firms for financial and disclosure related fraud. Investors can name independent directors as defendants in lawsuits, and they can vote against their re-election to express displeasure over the directors' ineffectiveness at monitoring managers. In a sample of securities class-action lawsuits from 1996 to 2010, about 11% of independent directors are named as defendants. The likelihood of being named is greater for audit committee members and directors who sell stock during the class period. Named directors receive more negative recommendations from Institutional Shareholder Services (ISS), a proxy advisory firm, and significantly more negative votes from shareholders than directors in a benchmark sample. They are also more likely than other independent directors to leave sued firms. Overall, shareholders use litigation along with director elections and director retention to hold some independent directors more accountable than others when firms experience financial fraud.

Keywords

Debt Securities; Lawsuits and Litigation; Legal Liability

Citation

Brochet, Francois, and Suraj Srinivasan. "Accountability of Independent Directors—Evidence from Firms Subject to Securities Litigation." Working Paper, 2013. (Harvard Business School Working Paper, No. 13-104, June 2013.)
  • SSRN

About The Author

Suraj Srinivasan

Accounting and Management
→More Publications

Related Work

    • February 2014
    • Journal of Financial Economics

    Accountability of Independent Directors—Evidence from Firms Subject to Securities Litigation

    By: Francois Brochet and Suraj Srinivasan
Related Work
  • Accountability of Independent Directors—Evidence from Firms Subject to Securities Litigation By: Francois Brochet and Suraj Srinivasan
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