Board Tenure Diversity, Culture and Firm Risk: Cross-Country Evidence

We examine the impact of board tenure diversity on firm risk in 37 countries. Using a difference-in-differences design facilitated by corporate board reforms across the world, we find that board tenure diversity leads to lower stock return volatility. This effect is more pronounced among firms with longer board tenures, which are more likely to result in board entrenchment and weak monitoring. The positive impact of board tenure diversity on reducing firm risk is weakened in more individualistic and higher power distance cultures, due to the balancing act between group independence and cohesiveness. Further tests suggest the lower risk levels are likely due to that tenure-diverse boards tend to adopt less risky investment policies.