رفتار هیئت مدیره پس از بحران مالی نسبت به مدیریت ریسک دار
Abstract
1- Introduction
2- The institutional emphasis on risk oversight after the financial crisis
3- Analysis of the frequency of departures from directors’ riskiest directorships
4- Analysis of changes in firm characteristics
5- Analysis of directors’ departures
6- Alternative explanations and robustness
7- Conclusions
References
Abstract
This paper documents that directors exhibit a strong tendency to resign from their riskiest directorships in the period subsequent to the financial crisis of 2007–2008. I also find that, in the post-crisis period, riskier directorships become more costly for directors and that the post-crisis director turnover alters board characteristics at riskier firms. While directors departing from their riskiest directorships are more experienced, hold more boards, and are better connected than other departing directors, no such pattern is observed among replacing directors. Finally, I find that departures from riskiest directorships are associated with lower announcement returns. Overall, my results suggest that, after the crisis, the costs of serving on risky boards have increased to the point of inducing board turnover that results in a non-trivial reshaping of corporate boards.
Introduction
In the aftermath of the financial crisis of 2007–2008, the widely held perception that excessive risk-taking was central to the breakdown of the financial markets has fueled extensive legislative, regulatory, and judicial activity on directors’ responsibility for risk oversight. In line with these efforts, shareholder activists, stock exchanges, credit rating agencies, proxy advisors, and corporate governance best practice guidelines have also devoted special attention to the role of the board in risk management during the post-crisis period. The purpose of this paper is to further our understanding of the economic consequences of this post-crisis emphasis on risk oversight by examining its effect on director turnover. Specifically, I propose that the emphasis on risk oversight has increased the cost of serving on corporate boards (especially on boards of riskier firms) to the point where directors are induced to relinquish their riskiest directorships. Directorship risk could impose costs on directors in several ways. First, oversight of corporate risk management may require substantial time and effort, especially given the highly specific and technical nature of some risk-management activities. Second, directorship risk may translate into volatility in the directors’ equity holdings and performance-based cash payments. In most cases, this risk cannot be perfectly diversified away. Third, litigation and other actions arising from shareholder discontent are likely to be more frequent in more volatile directorships. In addition to resulting in potential civil penalties, these actions could impose significant reputational, emotional, and opportunity costs on directors. Serving on riskier firms may have become more costly during the post-crisis period due to greater institutional emphasis on the role of the board in corporate risk management. In particular, more intense scrutiny of the directors’ oversight of corporate risks may have increased the directors’ workload, especially at firms with more complex risk management. The financial crisis may also have decreased the shareholders’ tolerance of firm risk, increasing the likelihood of boards’ being penalized for allowing higher levels of risk-taking.