Boardroom signals: Market reactions to director appointments and departures in Indian listed firms

Abstract

Using event study methodology, this paper examines the stock market reaction to announcements of appointments and departures of executive, independent, and other directors in Indian listed firms. The appointment of independent directors generates significant positive abnormal stock returns, reflecting investor confidence in enhanced board independence and governance. In contrast, appointments of executive and non independent directors elicit weak or negative reactions. Departures of directors across all categories do not significantly impact stock prices, signalling that the market distinguishes between routine board turnover and changes with substantive implications for firm performance or governance. By disaggregating board changes into executive, independent, and other categories within the context of an emerging market characterised by concentrated family ownership, the study extends a literature largely focused on Western economies and offers a context specific understanding of how investors process governance signals in heterogeneous institutional settings. The findings highlight the informational value of board composition changes and carry policy implications for regulators seeking to strengthen board independence requirements and disclosure norms in emerging markets.