Do Older Boards Affect Firm Performance? An Empirical Analysis Based on Japanese Firms

31 Pages Posted: 6 Jul 2011 Last revised: 13 Jul 2011

See all articles by Makoto Nakano

Makoto Nakano

Hitotsubashi University

Pascal Nguyen

Neoma Business School; University of Technology Sydney (UTS); Financial Research Network (FIRN)

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Date Written: July 6, 2011


We analyze the role of board age on firm performance using a large sample of Japanese firms. The results reveal the existence of a significant negative relationship. After controlling for endogeneity using firm size as instrument, the effect of board age is found to be more significant, consistent with the notion that older directors are more likely to retain (relinquish) their positions in strongly (poorly) performing firms. In addition, we show that the performance of younger and high-growth firms is more sensitive to board age, which points to a risk-based explanation. Indeed, it appears that older boards are more reluctant to take risks and particularly to undertake acquisitions. Overall, the results underline the disadvantage of (re)appointing older managers since the latter tend to be more conservative, perhaps because of their shorter decision horizons or greater vested interests.

Keywords: board of directors, top management, decision making, risk aversion, performance

JEL Classification: G31, G34

Suggested Citation

Nakano, Makoto and Nguyen, Pascal, Do Older Boards Affect Firm Performance? An Empirical Analysis Based on Japanese Firms (July 6, 2011). Available at SSRN: or

Makoto Nakano

Hitotsubashi University ( email )

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Tokyo 186-8601


Pascal Nguyen (Contact Author)

Neoma Business School ( email )

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University of Technology Sydney (UTS) ( email )

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+61 2 9514 7711 (Fax)


Financial Research Network (FIRN)

C/- University of Queensland Business School
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