Do Directors Have a Use-By Date? Examining the Impact of Board Tenure on Firm Performance

Authors

  • Joshua Livnat New York University, QMA
  • Gavin Smith QMA
  • Kate Suslava Bucknell University
  • Martin Tarlie GMO

DOI:

https://doi.org/10.33423/ajm.v19i2.2073

Keywords:

Management, Corporate, board members, Directors, Business, Firm Performance

Abstract

Corporate boards serve the important functions of monitoring and advising management. We examine whether boards consisting of longer-serving directors are better able to fulfill these functions due to firmspecific knowledge accumulation, or whether director performance suffers due to declining effectiveness in monitoring managers. Our evidence suggests that board tenure is positively related to forward-looking measures of market value and stock returns, with the relationship reversing after about nine years on average. The detrimental effect of tenure is stronger for high growth firms, which is consistent with the deterioration of the board members’ ability to perform their advisory functions.

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Published

2019-07-17

How to Cite

Livnat, J., Smith, G., Suslava, K., & Tarlie, M. (2019). Do Directors Have a Use-By Date? Examining the Impact of Board Tenure on Firm Performance. American Journal of Management, 19(2). https://doi.org/10.33423/ajm.v19i2.2073

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Section

Articles