Long-Tenured Independent Directors and Firm Performance

Strategic Management Journal, Forthcoming

44 Pages Posted: 11 May 2017 Last revised: 15 Oct 2021

See all articles by Stefano Bonini

Stefano Bonini

Stevens Institute of Technology - School of Business

Justin Deng

Rutgers University - Camden

Mascia Ferrari

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Dipartimento di Comunicazione ed Economia

Kose John

New York University (NYU) - Department of Finance

David Gaddis Ross

University of Florida

Date Written: September 15, 2021

Abstract

Agency perspectives suggest long-tenured independent directors (LTIDs) may be cronies of the CEO, making their boards less effective, but we theorize that LTIDs may have particular expertise and motivation to improve board effectiveness and ultimately firm performance. We find strong support for this prediction using 15 years of data on the S&P 1,500 firms and an instrument based on director age at time of hire. We also find that an LTID adds more value to firms that are complex or mature, had more CEOs during the LTID’s tenure, and have less entrenched management. Post-hoc analyses of director deaths and shareholder class action lawsuits and activist motions provide additional evidence that LTIDs add value to the firms on whose boards they serve.

Keywords: Corporate governance, firm performance, boards, tenure

JEL Classification: G32, G38, M48

Suggested Citation

Bonini, Stefano and Deng, Justin and Ferrari, Mascia and John, Kose and Ross, David Gaddis, Long-Tenured Independent Directors and Firm Performance (September 15, 2021). Strategic Management Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2965588 or http://dx.doi.org/10.2139/ssrn.2965588

Stefano Bonini (Contact Author)

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Justin Deng

Rutgers University - Camden ( email )

United States

Mascia Ferrari

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Dipartimento di Comunicazione ed Economia ( email )

Shool of Social Scences
Viale Allegri, 9
REGGIO EMILIA, RE 42121
Italy

Kose John

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0337 (Phone)
212-995-4233 (Fax)

David Gaddis Ross

University of Florida ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

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