Zombie Board: Board Tenure and Firm Performance

• 成果类型: Article
• 署名作者: Huang, Sterling; Hilary, Gilles
• 署名单位: Singapore Management University; Georgetown University
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12209
• 发表日期: 2018
• 页码: 1285-1329
• 关键词: accrual estimation errors; corporate governance; Audit quality; Judgment aggregation; ceo compensation; risk-taking; earnings; DIRECTORS; management; incentives

摘要

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.