Board-of-Director Monitoring and CEO Tenure
53 Pages Posted: 13 Jun 2007 Last revised: 25 Feb 2009
Date Written: February 25, 2009
We examine how CEO tenure and board characteristics affect board monitoring, CEO turnover, and firm performance. We find that board meeting frequency declines as CEO tenure increases and the board has a greater proportion of insiders. The intensity of both relations varies by industry. Tenured CEOs are less likely to be fired, but CEO tenure does not influence the sensitivity of forced turnover to firm performance. Increases in the equilibrium level of monitoring do not relate to operating improvements, but tenured CEOs continue to perform well even when subject to less scrutiny. Our results support the premise that the level of board monitoring evolves over time as a constrained equilibrium influenced by bargaining, learning, and the firm's environment.
Keywords: Board of Directors, Monitoring, Bargaining Power, Learning, Governance
JEL Classification: G30, G34, G38
Suggested Citation: Suggested Citation