On January 6, 2022 presenter, Michael Weisbach, and Discussant, Xiaoyun Yu, gave the seminar “Risk Perceptions, Board Networks, and Directors’ Reporting.” Independent directors of corporate boards have monitoring and advising duties. One incentive for independent directors to monitor is regulatory penalties. However, it is challenging to pin down a causal effect of regulatory penalties on directors’ monitoring behavior because public information on board monitoring rarely exists. Relying on the unique feature of the Chinese financial market, Professor Weisbach and his coauthors show that an independent director is more likely to vote against management after observing another director in his/her board network being penalized for negligence. The effect is long-lasting and stronger for directors with similar traits and at firms prone to frauds.
View the slides from Michael’s seminar.
Below you will find the Q&A from Michael’s seminar: