Abstract
We investigate whether average director tenure affects a firm’s stock return volatility. Exploiting director deaths as exogenous shocks, we show that firms losing long-tenured directors experience 16.75% higher post-event annualized return volatility compared to control firms. Firms with long-tenured boards tend to have smoother investment patterns and are more likely to promote internal candidates as CEOs. We also find that long board tenure is associated with more accurate analyst forecasts and with smaller post-corporate event volatility. Our results suggest that long-tenured boards help reduce risk through more predictable decisions and efficient information sharing.
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