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Did outside directors’ firm-specific accumulated knowledge benefit the firm’s stock performance during COVID-19?

Author

Listed:
  • Dharmendra Naidu

    (Department of Accounting, Monash Business School, Monash University, Clayton, VIC, Australia)

  • Kumari Ranjeeni

    (Pra2Njeeni, Berwick, VIC, Australia)

Abstract

We examine whether outside directors’ firm-specific accumulated knowledge in the forms of human and internal social capital benefitted the firm during COVID-19. Using a sample of 754 US firms during the COVID-19 collapse period, we find an inverted U-shaped relation between outside directors’ average board tenure and cumulative excess stock returns. Our result suggests that firms experienced optimal cumulative excess stock returns during COVID-19 when outside directors’ average board tenure is 10 years. We also find that the curvilinear relation is profound for outside directors with more internal social capital, suggesting that outside directors’ internal social capital plays a prominent role in enhancing board effectiveness during a crisis. Furthermore, we use several robustness checks to confirm the results. JEL Classification: D83, G30, G34, M41

Suggested Citation

  • Dharmendra Naidu & Kumari Ranjeeni, 2024. "Did outside directors’ firm-specific accumulated knowledge benefit the firm’s stock performance during COVID-19?," Australian Journal of Management, Australian School of Business, vol. 49(4), pages 605-635, November.
    • Handle: RePEc:sae:ausman:v:49:y:2024:i:4:p:605-635
    DOI: 10.1177/03128962231166831
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    Keywords

    Accumulated knowledge; COVID-19; director tenure; excess stock returns; global crisis; social capital;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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