Executive Tenure and Firm Performance: An Empirical Examination of the Indian Corporate Landscape

Abstract

In a typical corporate setting, a CEO is analogous to the captain of a ship with ultimate authority vested in him by the board of directors of the firm. During the period he heads the firm, it is expected that he would render his services as a fiduciary of the shareholders. By virtue of being in the role of a fiduciary, he would be expected to take wise decisions which benefits the firm in long/short term and the stakeholders of the firm become well off. Chairman is another top executive who oversees the actions of the CEO. In some cases, both the office of a CEO and chairman is headed by the same individual known as dual executive. The objective of this study is to explore the relationship between firm performance and tenure of top executives in the Indian context. Executive tenure is calculated by the number of years s/he spends in office in that capacity of a Chairman or a CEO. However, the length of the tenure varies to a great degree from firm to firm. There can be many factors impacting the duration of tenure of executives in India. So, this paper attempts to find out the impacts of performance on executive tenures of the firm. Other than that how much of an effect does various executive specific variables (such as executive age), firm specific variables (such as age of the firm, group affiliation/stand-alone firm) do have on the tenure of executives would also be explored. Top executives would be divided into three categories i.e. CEO/Managing Director, Chairman and Dual (holding both CEO and chairman position) to get better insight into the research question.