Zombie board: Board tenure and firm performance [Summary of paper]

In my paper, Zombie Boards: Board Tenure and Firm Performance, which was recently made publicly available on SSRN, I empirically investigate how board tenure is related to firm performance and corporate decisions, holding other firm, CEO, and board characteristics constant. I find that board tenure...

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Main Author: HUANG, Sterling
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2013
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Online Access:https://ink.library.smu.edu.sg/soa_research/1326
https://ink.library.smu.edu.sg/context/soa_research/article/2325/viewcontent/ZombieBoard_HarvardLawSchoolForumCG_2013_av.pdf
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spelling sg-smu-ink.soa_research-23252021-05-20T00:53:17Z Zombie board: Board tenure and firm performance [Summary of paper] HUANG, Sterling In my paper, Zombie Boards: Board Tenure and Firm Performance, which was recently made publicly available on SSRN, I empirically investigate how board tenure is related to firm performance and corporate decisions, holding other firm, CEO, and board characteristics constant. I find that board tenure has an inverted U-shaped relation with firm value, and that this curvilinear relation is reflected in M&A performance, financial reporting quality, corporate strategies and innovation, executive compensation, and CEO replacement. The results indicate that, for firms with short-tenured boards, the marginal effect of board learning dominates entrenchment effects, whereas for firms that have long-tenured boards, the opposite is true. The analysis relies on the assumption that some transaction costs prevent boards from fully adjusting to their optimal tenure level. But what are those transaction costs? For long-tenured boards, transaction costs could take the form of agency costs. For instance, board tenure choice may reflect the extent to which CEOs have influence over the board selection process (Hermalin and Weisbach, 1998). Further, firms with staggered boards can only replace a portion of board member each year, in which case the use of a staggered board itself introduces agency problems (Bebchuk and Cohen, 2005). For short-tenured boards, transaction costs could take the form of frictions in the labor market for directors. 2013-11-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/1326 https://ink.library.smu.edu.sg/context/soa_research/article/2325/viewcontent/ZombieBoard_HarvardLawSchoolForumCG_2013_av.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University Board Tenure Firm Value Corporate Policies Learning Entrenchment Accounting Business Law, Public Responsibility, and Ethics
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Board Tenure
Firm Value
Corporate Policies
Learning
Entrenchment
Accounting
Business Law, Public Responsibility, and Ethics
spellingShingle Board Tenure
Firm Value
Corporate Policies
Learning
Entrenchment
Accounting
Business Law, Public Responsibility, and Ethics
HUANG, Sterling
Zombie board: Board tenure and firm performance [Summary of paper]
description In my paper, Zombie Boards: Board Tenure and Firm Performance, which was recently made publicly available on SSRN, I empirically investigate how board tenure is related to firm performance and corporate decisions, holding other firm, CEO, and board characteristics constant. I find that board tenure has an inverted U-shaped relation with firm value, and that this curvilinear relation is reflected in M&A performance, financial reporting quality, corporate strategies and innovation, executive compensation, and CEO replacement. The results indicate that, for firms with short-tenured boards, the marginal effect of board learning dominates entrenchment effects, whereas for firms that have long-tenured boards, the opposite is true. The analysis relies on the assumption that some transaction costs prevent boards from fully adjusting to their optimal tenure level. But what are those transaction costs? For long-tenured boards, transaction costs could take the form of agency costs. For instance, board tenure choice may reflect the extent to which CEOs have influence over the board selection process (Hermalin and Weisbach, 1998). Further, firms with staggered boards can only replace a portion of board member each year, in which case the use of a staggered board itself introduces agency problems (Bebchuk and Cohen, 2005). For short-tenured boards, transaction costs could take the form of frictions in the labor market for directors.
format text
author HUANG, Sterling
author_facet HUANG, Sterling
author_sort HUANG, Sterling
title Zombie board: Board tenure and firm performance [Summary of paper]
title_short Zombie board: Board tenure and firm performance [Summary of paper]
title_full Zombie board: Board tenure and firm performance [Summary of paper]
title_fullStr Zombie board: Board tenure and firm performance [Summary of paper]
title_full_unstemmed Zombie board: Board tenure and firm performance [Summary of paper]
title_sort zombie board: board tenure and firm performance [summary of paper]
publisher Institutional Knowledge at Singapore Management University
publishDate 2013
url https://ink.library.smu.edu.sg/soa_research/1326
https://ink.library.smu.edu.sg/context/soa_research/article/2325/viewcontent/ZombieBoard_HarvardLawSchoolForumCG_2013_av.pdf
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