Person:

Wu, Andy

Our study introduces board committees as a crucial determinant of board actions. We examine how directors who structurally link different board committees—referred to as multi-committee directors (MCDs)—explain why some board actions are merely symbolic while others are more substantive. As a baseline, we argue that boards in general respond to financial restatements at peer firms by symbolically appointing new directors who are relatively inexperienced and unlikely to have a substantive impact. In contrast, boards with audit–nomination MCDs are more likely to take the substantive action of appointing new directors with the prior experience necessary to reduce the risk of their own future financial restatement. We combine qualitative interviews and a causal identification strategy using an original dataset covering Russell 3000 firms from 2001 to 2014.