Independent Director Tenure and Corporate Governance: Evidence from Insider Trading

Meng Gao; Sheng Huang

doi:10.2139/ssrn.4300157

Independent Director Tenure and Corporate Governance: Evidence from Insider Trading

Meng Gao (First Author), Sheng Huang (Participant Author)

Finance

Research output: Contribution to journal › Journal

Abstract

Executives trade more profitably and opportunistically over the course of the tenure of independent directors (IDs). IDs’ increased connections with and hence allegiance to executives are likely the channel through which ID tenure can affect executive trading. Executive opportunism is mitigated by disciplinary factors that include the presence of a firm’s internal trading policy, blockholders, and IDs with legal expertise as well as the risk of shareholder-initiated derivative lawsuits. These results point to an association between long-tenured IDs and weakened corporate governance.

Original language	English
Journal	Journal of Financial and Quantitative Analysis
DOIs	https://doi.org/10.2139/ssrn.4300157
Publication status	Published - 2022

Indexed by

ABDC-A*
SSCI
FT

Access to Document

10.2139/ssrn.4300157

OpenUrl availability

Full text

Cite this

@article{e5eea05b4cee4d9d8104603c775e53a2,

title = "Independent Director Tenure and Corporate Governance: Evidence from Insider Trading",

abstract = "Executives trade more profitably and opportunistically over the course of the tenure of independent directors (IDs). IDs{\textquoteright} increased connections with and hence allegiance to executives are likely the channel through which ID tenure can affect executive trading. Executive opportunism is mitigated by disciplinary factors that include the presence of a firm{\textquoteright}s internal trading policy, blockholders, and IDs with legal expertise as well as the risk of shareholder-initiated derivative lawsuits. These results point to an association between long-tenured IDs and weakened corporate governance.",

author = "Meng Gao and Sheng Huang",

year = "2022",

doi = "10.2139/ssrn.4300157",

language = "English",

journal = "Journal of Financial and Quantitative Analysis",

issn = "0022-1090",

publisher = "Cambridge University Press",

}

TY - JOUR

T1 - Independent Director Tenure and Corporate Governance

T2 - Evidence from Insider Trading

AU - Gao, Meng

AU - Huang, Sheng

PY - 2022

Y1 - 2022

N2 - Executives trade more profitably and opportunistically over the course of the tenure of independent directors (IDs). IDs’ increased connections with and hence allegiance to executives are likely the channel through which ID tenure can affect executive trading. Executive opportunism is mitigated by disciplinary factors that include the presence of a firm’s internal trading policy, blockholders, and IDs with legal expertise as well as the risk of shareholder-initiated derivative lawsuits. These results point to an association between long-tenured IDs and weakened corporate governance.

AB - Executives trade more profitably and opportunistically over the course of the tenure of independent directors (IDs). IDs’ increased connections with and hence allegiance to executives are likely the channel through which ID tenure can affect executive trading. Executive opportunism is mitigated by disciplinary factors that include the presence of a firm’s internal trading policy, blockholders, and IDs with legal expertise as well as the risk of shareholder-initiated derivative lawsuits. These results point to an association between long-tenured IDs and weakened corporate governance.

U2 - 10.2139/ssrn.4300157

DO - 10.2139/ssrn.4300157

M3 - Journal

SN - 0022-1090

JO - Journal of Financial and Quantitative Analysis

JF - Journal of Financial and Quantitative Analysis

ER -

Independent Director Tenure and Corporate Governance: Evidence from Insider Trading

Abstract

Indexed by

Access to Document

OpenUrl availability

Fingerprint

Cite this