Director Tenure Diversity and Board Monitoring Effectiveness

50 Pages Posted: 12 Mar 2017 Last revised: 20 May 2017

Na Li

Singapore Management University - School of Accountancy

Aida Sijamic Wahid

University of Toronto - Accounting; University of Toronto - Rotman School of Management

Date Written: February 7, 2017

Abstract

This study examines the impact of director tenure diversity on board effectiveness. We find that tenure-diverse boards exhibit significantly higher CEO performance-turnover sensitivity. Firms with tenure-diverse audit committees are less likely to experience accounting restatements. Tenure-diverse compensation committees also award less excess compensation and are less likely to overcompensate. While tenure-diverse boards seem to exhibit superior monitoring performance, there is limited evidence that their firms exhibit superior financial performance. The findings suggest that recent calls for board renewal, to the extent that they increase tenure diversity rather than just decrease average board tenure, may help enhance board monitoring.

Keywords: Corporate governance, director tenure, board tenure, board composition, board diversity, CEO turnover, restatement

JEL Classification: G30, G38, J10, J16

Suggested Citation

Li, Na and Wahid, Aida Sijamic, Director Tenure Diversity and Board Monitoring Effectiveness (February 7, 2017). Rotman School of Management Working Paper No. 2930136. Available at SSRN: https://ssrn.com/abstract=2930136 or http://dx.doi.org/10.2139/ssrn.2930136

Na Li

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

Aida Sijamic Wahid (Contact Author)

University of Toronto - Accounting ( email )

105 St George St
Toronto, ON M5S 3E6
Canada

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada

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