Director Tenure and Leadership Effectiveness over Internal Controls

Abstract

The purpose of this paper is to empirically examine the relationship between director tenure and leadership effectiveness as measured by weaknesses in internal control. Using data on over 3,000 U.S. companies for the years 2004-2014, we document a significant and positive relationship between the length of director tenure and corporate governance effectiveness. This result is consistent with the hypothesis that directors gain valuable expertise/experience as their tenure increases. Our results should be useful to management, corporate directors, investors, and other stakeholders that have an interest in the impact of director tenure on the leadership effectiveness of the board of directors