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 2018
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Online Access:https://ink.library.smu.edu.sg/soa_research/1728
https://ink.library.smu.edu.sg/context/soa_research/article/2755/viewcontent/HUANG_et_al_2018_ZombieBoard_JAR_av.pdf
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spelling sg-smu-ink.soa_research-27552021-05-20T00:39:53Z 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. 2018-09-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/1728 info:doi/10.1111/1475-679X.12209 https://ink.library.smu.edu.sg/context/soa_research/article/2755/viewcontent/HUANG_et_al_2018_ZombieBoard_JAR_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 Corporate policies Entrenchment Firm value Learning 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
Corporate policies
Entrenchment
Firm value
Learning
Accounting
Business Law, Public Responsibility, and Ethics
spellingShingle Board tenure
Corporate policies
Entrenchment
Firm value
Learning
Accounting
Business Law, Public Responsibility, and Ethics
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 2018
url https://ink.library.smu.edu.sg/soa_research/1728
https://ink.library.smu.edu.sg/context/soa_research/article/2755/viewcontent/HUANG_et_al_2018_ZombieBoard_JAR_av.pdf
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