Do tenure and age of board chair matter for R&D investment?

Abstract

Purpose

This study aims to examine whether the age and tenure of the chair of the board of directors are related to research and development (R&D) investment in China.

Design/methodology/approach

This study uses A-share manufacturing firms that traded on the Shanghai and Shenzhen stock exchange between 2009 and 2018. This study uses OLS regressions, controls for self-selection bias, and uses an instrumental variable to alleviate the concern of endogeneity.

Findings

This study finds that chair tenure has a negative relationship with R&D investment. This study does not find a significant relationship between chair age and R&D investment.

Originality/value

This study contributes to corporate governance and strategic management literature by highlighting chair tenure as a new factor affecting R&D investments. It also adds a significant contribution to the limited literature on the chair’s role in strategic decisions. Moreover, companies that are eager to strengthen corporate governance and maintain sustained innovation may reconsider the chair tenure. Given that many proposals for board governance reform explicitly stress the importance of limiting board tenure, this study contributes to policymakers by providing evidence in support of these proposals.

Citation

Azzam, A. and Alhababsah, S. (2022), "Do tenure and age of board chair matter for R&D investment?", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-01-2022-0023