Are Directors More Likely to Relinquish Their Riskiest Directorships after the Financial Crisis?

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