Mergers and the Market for Busy Directors: A Global Analysis

The issue of directors serving on multiple corporate boards has come under increasing scrutiny from both academicians and practitioners. There are two types of arguments associated with the conflicting evidence of how multiple directorships affect firm value and performance. The first is a reputation hypothesis that contends individuals gain valuable experience, skills, and networks from serving on multiple boards. The competing argument, which we refer to as the busyness hypothesis, is that these individuals are over-committed and thus unable to provide the careful monitoring and diligence that their positions require. The literature has not yet established whether the reputation or … Read more

How Investor Attention Affects Fraud Discovery and Value Loss in Securities Class Actions

A securities class action is a complex event characterized by scarce information, high uncertainty, and increased information asymmetry between stakeholders and firms.  In our paper “The Effect of Investor Attention on Fraud Discovery and Value Loss in Securities Class Action Litigation,” we argue that investor attention helps to disseminate information regarding fraudulent activity and to shape the market’s reaction to the lawsuit filing.  Specifically, we find that higher investor attention improves learning about fraudulent activity and exacerbates the negative effect of the litigation event.  As more investors learn about fraudulent activity, the negative effect of litigation on a firm’s reputational … Read more