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CEO Tenure, Independent Directors and Corporate Innovation

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  • Hsiang-Lan Chen

Abstract

The separation of ownership and managerial control in public corporations increases the organizational implications of the CEO-Board relationship. Boards of Directors and CEOs play an integral role in shaping firm strategies; therefore, this study examines the effect of CEO tenure and the moderating influence of independent directors on corporate innovation. Using a data set of electronics firms listed on the Taiwan Stock Exchange Corporations, this study finds an inverted-U relationship between CEO tenure and corporate innovation (i.e., R&D intensity and patents), supporting the view that CEOs experience life cycles. Additionally, independent director ratio exerts a positive moderating influence on the relationship between CEO tenure and corporate innovation, supporting the view that independent directors influence managerial choices by monitoring effectively and providing important resources. The findings provide one important managerial implication that firms competing on innovation may consider giving considerable weight to the nomination of more independent directors to the board because independent directors may serve as effective guardians and resource providers to encourage CEOs to focus on innovation.

Suggested Citation

  • Hsiang-Lan Chen, 2013. "CEO Tenure, Independent Directors and Corporate Innovation," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 3(5), pages 1-14.
    • Handle: RePEc:spt:apfiba:v:3:y:2013:i:5:f:3_5_14
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    Cited by:

    1. Nooraisah Katmon & Zam Zuriyati Mohamad & Norlia Mat Norwani & Omar Al Farooque, 2019. "Comprehensive Board Diversity and Quality of Corporate Social Responsibility Disclosure: Evidence from an Emerging Market," Journal of Business Ethics, Springer, vol. 157(2), pages 447-481, June.
    2. Yaoqin Li & Xixiong Xu & Yushu Zhu & Mamiza Haq, 2021. "CEO decision horizon and corporate R&D investments: an explanation based on managerial myopia and risk aversion," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5141-5175, December.
    3. Chen, Chung-Jen & Lin, Bou-Wen & Lin, Ya-Hui & Hsiao, Yung-Chang, 2016. "Ownership structure, independent board members and innovation performance: A contingency perspective," Journal of Business Research, Elsevier, vol. 69(9), pages 3371-3379.
    4. Luo Jing & Joonho Moon, 2021. "Airline Chief Executive Officer and Corporate Social Responsibility," Sustainability, MDPI, vol. 13(15), pages 1-12, August.
    5. Alfredo M. Bobillo & J.A. Rodríguez‐Sanz & F. Tejerina‐Gaite, 2018. "Corporate governance drivers of firm innovation capacity," Review of International Economics, Wiley Blackwell, vol. 26(3), pages 721-741, August.

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