How Do Companies Adjust Their Independent Directors after a Mishap?: Evidence from Independent Directors' Background

The mission of independent directors is mitigating conflictions between majority and minority shareholders. This paper selects listed companies punished by CSRC or received qualified audit opinions from 2002 to 2004 as our target sample, empirically tests behavior and economic consequence of adjustment of independent directors. Empirical evidence shows that listed companies will increase independent directors with accounting background after a mishap to mitigate agent distress, and these companies enjoy significantly contemporaneous return after the adjustment.