Following surprise independent director departures, affected firms have worse stock and operating performance, are more likely to restate earnings, face shareholder litigation, suffer from an extreme negative return event, and make worse mergers and acquisitions. The announcement returns to surprise director departures are negative, suggesting that the market infers bad news from surprise departures. We use exogenous variation in independent director departures triggered by director deaths to test whether surprise independent director departures cause these negative outcomes or whether an anticipation of negative outcomes is responsible for the surprise director departure. Our evidence is more consistent with the latter.

We examine how real investment decisions of firms are affected by their CEOs' career concerns. Relative to their older counterparts, younger CEOs are more likely to enter new lines of businesses and exit from existing ones. Younger CEOs undertake bolder expansions and divestments, which lead to significant increases and decreases in firm size, respectively. Younger CEOs also prefer to grow through acquisitions than de novo investments. However, such busier investment style of the younger CEOs appears not to hurt firm efficiency. Additional results also shed light on how CEO favoritism distorts capital allocation within firms.

Following surprise independent director departures, affected firms have worse stock and operating performance, are more likely to restate earnings, face shareholder litigation, suffer from an extreme negative return event, and make worse mergers and acquisitions. The announcement returns to surprise director departures are negative, suggesting that the market infers bad news from surprise departures. We use exogenous variation in independent director departures triggered by director deaths to test whether surprise independent director departures cause these negative outcomes or whether an anticipation of negative outcomes is responsible for the surprise director departure. Our evidence is more consistent with the latter. Received January 12, 2016; editorial decision October 7, 2016 by Editor David Denis.