Old Captains at the Helm: Chairman Age and Firm Performance

57 Pages Posted: 12 Feb 2012 Last revised: 20 Feb 2013

Urs Waelchli

Rochester-Bern Executive Programs; University of Rochester - Simon Business School

Jonas Zeller

University of Berne – Institute for Financial Management

Date Written: December 12, 2012

Abstract

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.

Keywords: age, chairman of the board, cognitive abilities, firm performance, corporate governance, unlisted firms

JEL Classification: G30, L20

Suggested Citation

Waelchli, Urs and Zeller, Jonas, Old Captains at the Helm: Chairman Age and Firm Performance (December 12, 2012). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2002629 or http://dx.doi.org/10.2139/ssrn.2002629

Urs Waelchli (Contact Author)

Rochester-Bern Executive Programs ( email )

Engehaldenstrasse 4
Bern, 3012
Switzerland

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Jonas Zeller

University of Berne – Institute for Financial Management ( email )

Engehaldenstrasse 4
Bern, 3012
Switzerland

HOME PAGE: http://www.ifm.unibe.ch

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