Directors: Older and Wiser, or Too Old to Govern?

74 Pages Posted: 26 Nov 2018 Last revised: 11 Apr 2019

See all articles by Ronald W. Masulis

Ronald W. Masulis

University of New South Wales - Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Cong Wang

The Chinese University of Hong Kong, Shenzhen

Fei Xie

University of Delaware - Lerner College of Business and Economics; European Corporate Governance Institute (ECGI)

Shuran Zhang

Jinan University - Management School

Date Written: April 2, 2019

Abstract

An unintended consequence of recent board governance reforms in the U.S. is that firms increasingly tap into the pool of older director candidates, causing their boards to become substantially older. We investigate the board aging phenomenon and its implications for corporate governance. We find evidence of both monitoring deficiencies and advisory benefits associated with older independent directors. Specifically, older directors weaken board oversight in acquisition decisions, payout policies, CEO turnover, executive compensation, and financial reporting. However, they provide valuable advisory services when they have specialized experience and when managers have a greater need for board advice.

Keywords: boardroom aging, older directors, board monitoring, board advising, agency problems

JEL Classification: G34, G32, G35, G41

Suggested Citation

Masulis, Ronald W. and Wang, Cong and Xie, Fei and Zhang, Shuran, Directors: Older and Wiser, or Too Old to Govern? (April 2, 2019). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 584/2018. Available at SSRN: https://ssrn.com/abstract=3284874 or http://dx.doi.org/10.2139/ssrn.3284874

Ronald W. Masulis (Contact Author)

University of New South Wales - Australian School of Business ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia
612-9385-5860 (Phone)
612-9385-6347 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Cong Wang

The Chinese University of Hong Kong, Shenzhen ( email )

Fei Xie

University of Delaware - Lerner College of Business and Economics ( email )

42 Amstel Ave
Newark, DE 19716
United States
(302) 8313811 (Phone)

HOME PAGE: http://sites.google.com/site/feisresearch/

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Shuran Zhang

Jinan University - Management School ( email )

No. 601, West Huangpu Road
Guangzhou, Guangdong 510632
China

Register to save articles to
your library

Register

Paper statistics

Downloads
233
rank
128,225
Abstract Views
1,056
PlumX Metrics