We view director tenure as an indicator of a firm's stability. Longer board tenure indicates that shareholders are satisfied with their director appointments, that the board has the relevant mix of capital, that it is effective at monitoring and advising management, and that the firm is unlikely to face operational and strategic problems that require drastic changes to its board. Using a broad sample of up to 3800 firms over a 20-year period, we show that firms with longer board tenure have higher future abnormal returns. Our evidence suggests that investors misprice board tenure: longer board tenure is associated with higher market valuations but not with higher expected returns as measured by analysts' target prices.
Global Finance Journal
Full text attached
Livnat, Joshua; QMA; Suslava, Kate; and GMO. "Board Tenure and Firm Performance." (2021) .
Available for download on Wednesday, February 01, 2023