Does board turnover enhance firm performance? A contingency approach

Research Question/Issue: Does board turnover improve future firm performance? Our research investigates whether and when board turnover is beneficial from an information processing perspective. Research Findings/Insights: Drawing from information processing theory, we propose and test a novel model...

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Main Authors: Qiang, Wei, Wong, Sze Sze, Koh, Kevin, Tong, Yen Hee
Other Authors: Nanyang Business School
Format: Article
Language:English
Published: 2023
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Online Access:https://hdl.handle.net/10356/170498
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Institution: Nanyang Technological University
Language: English
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spelling sg-ntu-dr.10356-1704982023-09-15T07:21:02Z Does board turnover enhance firm performance? A contingency approach Qiang, Wei Wong, Sze Sze Koh, Kevin Tong, Yen Hee Nanyang Business School Business::Finance Corporate Governance Board Turnover Research Question/Issue: Does board turnover improve future firm performance? Our research investigates whether and when board turnover is beneficial from an information processing perspective. Research Findings/Insights: Drawing from information processing theory, we propose and test a novel model that explains how magnitude of board turnover influences future firm performance, and what pre-turnover board characteristics mitigate the negative impact of board turnover on future firm performance. We find that board turnover negatively influences future firm performance, and pre-turnover board meeting frequency, board job-related diversity, CEO power relative to the board, and board tenure moderate this negative impact. Theoretical/Academic Implications: Past findings of the impact of board turnover are limited and equivocal, suggesting the need to conduct more systematic investigation to explain post-turnover firm performance and to consider boundary conditions that affect this relationship. Building on information processing theory, we explain that the negative impact of board turnover on future firm performance is due to disruption of the board's information elaboration ability. Furthermore, we advance the novel perspective that boards which developed higher information elaboration ability prior to turnover can better mitigate the disruption in information processing resulting from board turnover. Practitioner/Policy Implications: There are costs to board turnover that should be considered seriously. Our study demonstrates that higher magnitude of board turnover leads to poorer subsequent firm performance. The importance of pre-turnover board's information elaboration ability implies that board turnover should be planned and actively managed—just like CEO succession planning—to minimize information processing disruption from turnover. Ministry of Education (MOE) Sze-Sze Wong and Kevin Koh acknowledge the financial support from the Ministry of Education, Singapore (RG71/16). Wei Qiang acknowledges the financial support from Shenzhen Peacock Talent Plan Start-up Research Fund (Grant No. GA11409008), Shenzhen Key Research Base of Humanities and Social Sciences (Grant No. KP191001), and Humanities and Social Sciences Development Special Fund of Harbin Institute of Technology, Shenzhen (Grant No. GD11000024). 2023-09-15T07:21:02Z 2023-09-15T07:21:02Z 2023 Journal Article Qiang, W., Wong, S. S., Koh, K. & Tong, Y. H. (2023). Does board turnover enhance firm performance? A contingency approach. Corporate Governance: An International Review, 31(3), 405-424. https://dx.doi.org/10.1111/corg.12455 0964-8410 https://hdl.handle.net/10356/170498 10.1111/corg.12455 2-s2.0-85129654194 3 31 405 424 en RG71/16 Corporate Governance: An International Review © 2022 John Wiley & Sons Ltd. All rights reserved.
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic Business::Finance
Corporate Governance
Board Turnover
spellingShingle Business::Finance
Corporate Governance
Board Turnover
Qiang, Wei
Wong, Sze Sze
Koh, Kevin
Tong, Yen Hee
Does board turnover enhance firm performance? A contingency approach
description Research Question/Issue: Does board turnover improve future firm performance? Our research investigates whether and when board turnover is beneficial from an information processing perspective. Research Findings/Insights: Drawing from information processing theory, we propose and test a novel model that explains how magnitude of board turnover influences future firm performance, and what pre-turnover board characteristics mitigate the negative impact of board turnover on future firm performance. We find that board turnover negatively influences future firm performance, and pre-turnover board meeting frequency, board job-related diversity, CEO power relative to the board, and board tenure moderate this negative impact. Theoretical/Academic Implications: Past findings of the impact of board turnover are limited and equivocal, suggesting the need to conduct more systematic investigation to explain post-turnover firm performance and to consider boundary conditions that affect this relationship. Building on information processing theory, we explain that the negative impact of board turnover on future firm performance is due to disruption of the board's information elaboration ability. Furthermore, we advance the novel perspective that boards which developed higher information elaboration ability prior to turnover can better mitigate the disruption in information processing resulting from board turnover. Practitioner/Policy Implications: There are costs to board turnover that should be considered seriously. Our study demonstrates that higher magnitude of board turnover leads to poorer subsequent firm performance. The importance of pre-turnover board's information elaboration ability implies that board turnover should be planned and actively managed—just like CEO succession planning—to minimize information processing disruption from turnover.
author2 Nanyang Business School
author_facet Nanyang Business School
Qiang, Wei
Wong, Sze Sze
Koh, Kevin
Tong, Yen Hee
format Article
author Qiang, Wei
Wong, Sze Sze
Koh, Kevin
Tong, Yen Hee
author_sort Qiang, Wei
title Does board turnover enhance firm performance? A contingency approach
title_short Does board turnover enhance firm performance? A contingency approach
title_full Does board turnover enhance firm performance? A contingency approach
title_fullStr Does board turnover enhance firm performance? A contingency approach
title_full_unstemmed Does board turnover enhance firm performance? A contingency approach
title_sort does board turnover enhance firm performance? a contingency approach
publishDate 2023
url https://hdl.handle.net/10356/170498
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