In the paper, The Dark Side of Outside Directors: Do They Quit When They are Most Needed? which was recently made publicly available on SSRN, my co-authors (Rüdiger Fahlenbrach from the Ecole Polytechnique Fédérale de Lausanne and the Swiss Finance Institute and Angie Low from the Nanyang Technological University) and I focus on a cost of board independence that has not received attention so far and demonstrate that it is economically significant. Corporate governance reforms following the corporate scandals of the turn of the century focused heavily on increasing the representation of outside directors on boards. Listing standards on U.S. exchanges were changed to require boards to have a majority of outside directors. Many countries have introduced requirements on the percentage of outside directors on boards as well as on the fraction of outside directors on the nominating committee, compensation committee, and audit committee (see IOSCO (2007)).

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