How product market competition and complexity influence the on-job-learning effect and entrenchment effect of board tenure

Cheng-Shou Lu, Anlin Chen and Lanfeng Kao

International Review of Economics & Finance, 2017, vol. 50, issue C, 175-195

Abstract: The on-job-learning effect implies a positive relationship between firm performance and board tenure. The entrenchment effect implies a negative relationship instead. We document a hump-shaped relationship between board tenure and firm performance. The hump-shaped relationship is eased by competition and complexity. Competition reduces the need of board monitoring while complexity raises the need of board advising leading to the dominance of on-job-learning effect over entrenchment effect and a positive relationship between board tenure and firm performance. The propensity for fraud and stock performance of M&As are non-linearly related to board tenure because of the combination of on-job-learning and entrenchment effects.

Keywords: Board tenure; Complexity; Entrenchment effect; On-job-learning effect; Product market competition (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:50:y:2017:i:c:p:175-195

DOI: 10.1016/j.iref.2017.04.002

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