Old Captains at the Helm: Chairman Age and Firm Performance
University of Rochester - Simon Business School
University of Berne – Institute for Financial Management
December 12, 2012
Journal of Banking and Finance, Forthcoming
This paper examines whether the chairmen of the board (COBs) impose their life cycles on the firms over which they preside. Using a large sample of unlisted firms, we find a robust negative relation between COB age and firm performance. COBs age much like ‘ordinary’ people. Their cognitive abilities deteriorate, and they experience significant shifts in motivation. Deteriorating cognitive abilities are the main driver of the performance effect that we observe. The results imply that succession planning problems in unlisted firms are real. Mandatory retirement age clauses cannot solve these problems.
Number of Pages in PDF File: 57
Keywords: age, chairman of the board, cognitive abilities, firm performance, corporate governance, unlisted firms
JEL Classification: G30, L20
Date posted: February 12, 2012 ; Last revised: February 20, 2013
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