Please use this identifier to cite or link to this item: http://hdl.handle.net/10125/59302

Do Directors Have a Use-By Date? Examining the Impact of Board Tenure on Firm Performance

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Title:Do Directors Have a Use-By Date? Examining the Impact of Board Tenure on Firm Performance
Authors:Suslava, Kate
Livnat, Joshua
Smith, Gavin
Tarlie, Martin
Keywords:board tenure
firm value
abnormal returns
growth firms
Date Issued:29 Aug 2018
Abstract:Corporate boards serve the dual important functions of monitoring and advising management. We examine whether corporate boards consisting of longer-serving independent directors are better able to fulfill these functions due to firm-specific knowledge accumulation, or whether director performance suffers due to declining effectiveness in monitoring managers and/or overall staleness of board capital (board value to shareholders). Using a broad sample of up to 3,800 firms over a 20-year period, our evidence suggests that board tenure is positively related to forward-looking measures of market value and stock returns, with the relationship reversing after about nine years on average. The detrimental effect of longer average board tenure on market value (after an initial period of positive effects) is stronger for high growth firms, which is consistent with the deterioration of the board members’ ability to perform their advisory functions
URI:http://hdl.handle.net/10125/59302
Appears in Collections: 05 Corporate Governance


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