The Unravelling Abnormal Resignations of Independent Directors: An Information System Analysis of Influencing Factors and Market Reactions

Abstract

The governance structures of contemporary organizations are increasingly challenged by financial uncertainties, evolving ownership patterns, heightened scrutiny of ethical financial practices, and the expanding influence of information systems in decision-making. Independent directors, who play a crucial role within these governance frameworks, often face complex and multifaceted dilemmas, including the significant decision of whether to resign from their positions. This study aims to comprehensively investigate the variables influencing independent directors' resignation decisions, focusing on the interplay between financial metrics such as Return on Equity and Earnings Management, audit opinions, major litigation, changes in the largest shareholder, liquidity ratios, and governance components like information system functionality. The study seeks to enhance existing corporate governance theory and provide valuable insights for the development of effective governance structures. Employing a qualitative approach, the research conducted eight semi-structured interviews followed by a three-step thematic analysis to explore the lived experiences of independent directors and the intricate factors affecting their resignation decisions. The findings highlight the considerable influence of financial metrics, governance challenges, and the role of information systems on the likelihood of independent director resignations. The interaction of these dimensions reveals a complex landscape that directors navigate, underscoring the necessity of an integrated approach to governance analysis. This research offers novel insights by bridging gaps in current literature and presenting a holistic perspective on the factors driving director resignations. The study’s originality lies in its examination of the interconnected financial, governance, and technological dimensions, contributing both to academic discourse and practical governance strategies. The implications of this research are significant, providing guidance for organizations seeking to strengthen their governance structures, enhance board effectiveness, and adeptly manage the complexities of the modern business environment.