Independent Director Tenure and Corporate Governance: Evidence from Insider Trading

Accepted at Journal of Financial and Quantitative Analysis

59 Pages Posted: 22 Dec 2022

See all articles by Meng Gao

Meng Gao

University of International Business and Economics (UIBE)

Sheng Huang

China Europe International Business School (CEIBS)

Date Written: December 12, 2022

Abstract

Executives trade more profitably and opportunistically over the course of the tenure of independent directors (IDs). IDs' increased connections with and hence allegiance to executives are likely the channel through which ID tenure can affect executive trading. Executive opportunism is mitigated by disciplinary factors that include the presence of a firm's internal trading policy, blockholders, and IDs with legal expertise as well as the risk of shareholder-initiated derivative lawsuits. These results point to an association between long-tenured IDs and weakened corporate governance.

Keywords: independent directors, director tenure, insider trading, board independence, corporate governance

JEL Classification: G30; G34

Suggested Citation

Gao, Meng and Huang, Sheng, Independent Director Tenure and Corporate Governance: Evidence from Insider Trading (December 12, 2022). Accepted at Journal of Financial and Quantitative Analysis, Available at SSRN: https://ssrn.com/abstract=4300157 or http://dx.doi.org/10.2139/ssrn.4300157

Meng Gao (Contact Author)

University of International Business and Economics (UIBE) ( email )

10, Huixin Dongjie
Changyang District
Beijing, Beijing 100029
China

Sheng Huang

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

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