Zombie Board: Board Tenure and Firm Performance

We show that board tenure exhibits an inverted U-shaped relation with firm value and accounting performance. The quality of corporate decisions, such as M&A, financial reporting quality, and CEO compensation, also has a quadratic relation with board tenure. Our results are consistent with the in...

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Main Authors: HUANG, Sterling, HILARY, Gilles
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Language:English
Published: Institutional Knowledge at Singapore Management University 2017
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Online Access:https://ink.library.smu.edu.sg/soa_research/1329
https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=2328&context=soa_research
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spelling sg-smu-ink.soa_research-23282018-02-12T03:26:30Z Zombie Board: Board Tenure and Firm Performance HUANG, Sterling HILARY, Gilles We show that board tenure exhibits an inverted U-shaped relation with firm value and accounting performance. The quality of corporate decisions, such as M&A, financial reporting quality, and CEO compensation, also has a quadratic relation with board tenure. Our results are consistent with the interpretation that directors’ on-the-job learning improves firm value up to a threshold, at which point entrenchment dominates and firm performance suffers. To address endogeneity concerns, we use a sample of firms in which an outside director suffered a sudden death, and find that sudden deaths that move board tenure away from (toward) the empirically observed optimum level in the cross-section are associated with negative (positive) announcement returns. The quality of corporate decisions also follows an inverted U-shaped pattern in a sample of firms affected by the death of a director. 2017-11-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/1329 https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=2328&context=soa_research 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 Corporate Finance Strategic Management Policy
institution Singapore Management University
building SMU Libraries
country Singapore
collection InK@SMU
language English
topic Board Tenure
Firm Value
Corporate Policies
Learning
Entrenchment
Accounting
Corporate Finance
Strategic Management Policy
spellingShingle Board Tenure
Firm Value
Corporate Policies
Learning
Entrenchment
Accounting
Corporate Finance
Strategic Management Policy
HUANG, Sterling
HILARY, Gilles
Zombie Board: Board Tenure and Firm Performance
description We show that board tenure exhibits an inverted U-shaped relation with firm value and accounting performance. The quality of corporate decisions, such as M&A, financial reporting quality, and CEO compensation, also has a quadratic relation with board tenure. Our results are consistent with the interpretation that directors’ on-the-job learning improves firm value up to a threshold, at which point entrenchment dominates and firm performance suffers. To address endogeneity concerns, we use a sample of firms in which an outside director suffered a sudden death, and find that sudden deaths that move board tenure away from (toward) the empirically observed optimum level in the cross-section are associated with negative (positive) announcement returns. The quality of corporate decisions also follows an inverted U-shaped pattern in a sample of firms affected by the death of a director.
format text
author HUANG, Sterling
HILARY, Gilles
author_facet HUANG, Sterling
HILARY, Gilles
author_sort HUANG, Sterling
title Zombie Board: Board Tenure and Firm Performance
title_short Zombie Board: Board Tenure and Firm Performance
title_full Zombie Board: Board Tenure and Firm Performance
title_fullStr Zombie Board: Board Tenure and Firm Performance
title_full_unstemmed Zombie Board: Board Tenure and Firm Performance
title_sort zombie board: board tenure and firm performance
publisher Institutional Knowledge at Singapore Management University
publishDate 2017
url https://ink.library.smu.edu.sg/soa_research/1329
https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=2328&context=soa_research
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