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Old captains at the helm: Chairman age and firm performance

Urs Waelchli () and Jonas Zeller

Journal of Banking & Finance, 2013, vol. 37, issue 5, 1612-1628

Abstract: This paper examines whether the chairmen of the boards (COBs) impose their life cycles on the firms over which they preside. Using a large sample of unlisted firms, we find a robust negative relation between COB age and firm performance. COBs age much like ‘ordinary’ people. Their cognitive abilities deteriorate, and they experience significant shifts in motivation. Deteriorating cognitive abilities are the main driver of the performance effect that we observe. The results imply that succession planning problems in unlisted firms are real. Mandatory retirement age clauses cannot solve these problems.

Keywords: Age; Chairman of the board; Cognitive abilities; Firm performance; Corporate governance; Unlisted firms; Survey (search for similar items in EconPapers)
JEL-codes: G30 L20 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:eee:jbfina:v:37:y:2013:i:5:p:1612-1628