Director Tenure Diversity and Board Monitoring Effectiveness
51 Pages Posted: 12 Mar 2017 Last revised: 22 May 2018
Date Written: June 21, 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 and that firms with tenure-diverse audit committees are less likely to experience accounting restatements. Furthermore, we document that tenure-diverse compensation committees also award less excess compensation and are less likely to overcompensate. Even though 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 it would 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