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Directors: Older and Wiser, or Too Old to Govern?

Published online by Cambridge University Press:  18 October 2023

Ronald Masulis Open the ORCID record for Ronald Masulis [Opens in a new window] ,
Cong Wang ,
Fei Xie  and
Shuran Zhang
Ronald Masulis*
Affiliation:
School of Banking and Finance, UNSW Business School, University of New South Wales ABFER and ECGI
Cong Wang
Affiliation:
School of Management and Economics, The Chinese University of Hong Kong, Shenzhen wangcong@cuhk.edu.cn
Fei Xie
Affiliation:
Lerner College of Business and Economics, University of Delaware and ECGI xief@udel.edu
Shuran Zhang
Affiliation:
Hong Kong Polytechnic University Faculty of Business School of Accounting and Finance shuran.zhang@polyu.edu.hk
*
ron.masulis@unsw.edu.au (corresponding author)
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Abstract

An unintended consequence of recent governance reforms in the United States is firms’ greater reliance on older director candidates, resulting in noticeable board aging. We investigate this phenomenon’s implications for corporate governance. We document that older independent directors exhibit poorer board meeting attendance, are less likely to serve on or chair key board committees, and receive less shareholder support in annual elections. These directors are associated with weaker board oversight in acquisitions, CEO turnovers, executive compensation, and financial reporting. However, they can also provide particularly valuable advice when they have specialized experience or when firms have greater advisory needs.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , First View , pp. 1 - 40
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank an anonymous referee, Jack Bao, Bernard Black, Dan Bradley, Jennifer Conrad (the editor), Francois Derrien, Ran Duchin, Charles Elson, Laura Field, Dirk Jenter, Feng Jiang, Tao Shu, Stefan Zeume, and participants at the 2017 American Finance Association annual meetings, the 2016 China International Conference in Finance, the 2016 Conference on Empirical Legal Studies in Europe, the 2018 Financial Intermediation Research Society Conference, Tsinghua University, and the University of Connecticut for valuable comments. We also extend our gratitude to Dirk Jenter for sharing data on CEO turnovers, Tracie Woidtke and Matthew Serfling for sharing their director-specific quality measures, and Zonghe Guo and Nicholas Turner for outstanding research assistance.

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