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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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 |
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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 |
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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. |
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HUANG, Sterling HILARY, Gilles |
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HUANG, Sterling HILARY, Gilles |
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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 |
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Zombie board: Board tenure and firm performance |
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Zombie board: Board tenure and firm performance |
title_sort |
zombie board: board tenure and firm performance |
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Institutional Knowledge at Singapore Management University |
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2018 |
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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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