Does board turnover enhance firm performance? A contingency approach

Kevin KOH, Yen H. TONG, Sze-Sze WONG, Wei QIANG

Research output: Other Conference ContributionsConference Paper (other)

Abstract

Calls for more regular board turnover have become more common among investors and the corporate governance community. However, board turnover may not be as beneficial as its proponents suggest because it can engender
both positive and negative effects on firm performance. Using a sample of U.S. firms from 2000 to 2013, we find that board turnover has a negative association with two accounting-based measures of future firm performance. Our results are robust using different time periods to measure future firm performances and after addressing for endogeneity. Our findings suggest that in general, disruption of group processes arising from board turnover limits the board’s effectiveness in advising and monitoring firms. However, we also find that the negative impact of board turnover on firm performance is attenuated by board diversity and corporate diversification. These findings suggest that when boards are better positioned to handle the impact of board turnover on firm performance when they already have the capacity and experience to cope with complex information-processing and decision-making.
Original languageEnglish
Publication statusPublished - Jun 2018
EventThe 41st Annual Conference of the Canadian Academic Accounting Association : Accounting and the Public Trust - Fairmont Palliser Hotel, Calgary, Canada
Duration: 14 Jun 201816 Jun 2018
https://www.caaa.ca/news-and-events/accounting-in-the-public-trust-caaa-annual-conference-2018/ (Conference Program)

Conference

ConferenceThe 41st Annual Conference of the Canadian Academic Accounting Association : Accounting and the Public Trust
Abbreviated title2018 CAAA Annual Conference
CountryCanada
CityCalgary
Period14/06/1816/06/18
Internet address

Fingerprint

Turnover
Contingency approach
Firm performance
Information processing
Disruption
Board effectiveness
Decision making
Investors
Group processes
Corporate diversification
Endogeneity
Corporate governance
Monitoring

Cite this

KOH, K., TONG, Y. H., WONG, S-S., & QIANG, W. (2018). Does board turnover enhance firm performance? A contingency approach. Paper presented at The 41st Annual Conference of the Canadian Academic Accounting Association : Accounting and the Public Trust, Calgary, Canada.
KOH, Kevin ; TONG, Yen H. ; WONG, Sze-Sze ; QIANG, Wei. / Does board turnover enhance firm performance? A contingency approach. Paper presented at The 41st Annual Conference of the Canadian Academic Accounting Association : Accounting and the Public Trust, Calgary, Canada.
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KOH, K, TONG, YH, WONG, S-S & QIANG, W 2018, 'Does board turnover enhance firm performance? A contingency approach', Paper presented at The 41st Annual Conference of the Canadian Academic Accounting Association : Accounting and the Public Trust, Calgary, Canada, 14/06/18 - 16/06/18.

Does board turnover enhance firm performance? A contingency approach. / KOH, Kevin; TONG, Yen H.; WONG, Sze-Sze; QIANG, Wei.

2018. Paper presented at The 41st Annual Conference of the Canadian Academic Accounting Association : Accounting and the Public Trust, Calgary, Canada.

Research output: Other Conference ContributionsConference Paper (other)

TY - CONF

T1 - Does board turnover enhance firm performance? A contingency approach

AU - KOH, Kevin

AU - TONG, Yen H.

AU - WONG, Sze-Sze

AU - QIANG, Wei

PY - 2018/6

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N2 - Calls for more regular board turnover have become more common among investors and the corporate governance community. However, board turnover may not be as beneficial as its proponents suggest because it can engenderboth positive and negative effects on firm performance. Using a sample of U.S. firms from 2000 to 2013, we find that board turnover has a negative association with two accounting-based measures of future firm performance. Our results are robust using different time periods to measure future firm performances and after addressing for endogeneity. Our findings suggest that in general, disruption of group processes arising from board turnover limits the board’s effectiveness in advising and monitoring firms. However, we also find that the negative impact of board turnover on firm performance is attenuated by board diversity and corporate diversification. These findings suggest that when boards are better positioned to handle the impact of board turnover on firm performance when they already have the capacity and experience to cope with complex information-processing and decision-making.

AB - Calls for more regular board turnover have become more common among investors and the corporate governance community. However, board turnover may not be as beneficial as its proponents suggest because it can engenderboth positive and negative effects on firm performance. Using a sample of U.S. firms from 2000 to 2013, we find that board turnover has a negative association with two accounting-based measures of future firm performance. Our results are robust using different time periods to measure future firm performances and after addressing for endogeneity. Our findings suggest that in general, disruption of group processes arising from board turnover limits the board’s effectiveness in advising and monitoring firms. However, we also find that the negative impact of board turnover on firm performance is attenuated by board diversity and corporate diversification. These findings suggest that when boards are better positioned to handle the impact of board turnover on firm performance when they already have the capacity and experience to cope with complex information-processing and decision-making.

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M3 - Conference Paper (other)

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KOH K, TONG YH, WONG S-S, QIANG W. Does board turnover enhance firm performance? A contingency approach. 2018. Paper presented at The 41st Annual Conference of the Canadian Academic Accounting Association : Accounting and the Public Trust, Calgary, Canada.