50 Pages Posted: 12 Mar 2017 Last revised: 20 May 2017
Date Written: February 7, 2017
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: 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