Stefano Bonini (Stevens Institute of Technology) on "Til death do us part: Do long-tenured independent directors improve firm performance?"

Abstract
Recent surveys show that 24% of independent directors in Russel 3,000 …rms have continuously served on their boards for …fteen years or more. Based on a sample of S&P 1500 fi…rms over the period 1998-2012, we show that long-tenure directors improve fi…rm performance, largely determined by only one director exhibiting an abnormally long tenure. In fi…rms where one independent director has served on the board for 20 years or more we document strong positive effects on fi…nancial performance. The different channels include: (1) Long-tenured directors protect the …firm and other board members from corporate scandals, (2) Long-tenured independent directors appear to be highly skilled individuals that over time accumulate information and knowledge that is valuable to the companies they serve in, even when the cost of acquiring information is high. Our results have material implications for the ongoing debate and recent trends on setting tenure limits for outside directors.

JEL Codes: G32, G38, M48

Keywords: Corporate governance, fi…rm value, board of directors, tenure

Joint work with Justin Deng (New York University, Leonard N. Stern School of Business), Mascia Ferrari (University of Modena and NYU - Stern School of Business), Kose John (New York University, Leonard N. Stern School of Business)