TAILIEUCHUNG - CEO tenure, independent directors and corporate innovation

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 (., 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. | Journal of Applied Finance Banking vol. 3 no. 5 2013 187-197 ISSN 1792-6580 print version 1792-6599 online Scienpress Ltd 2013 CEO Tenure Independent Directors and Corporate Innovation Hsiang-Lan Chen1 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 . 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. JEL classification numbers O31 O32 G34. Keywords Innovation R D investment Patents CEO tenure Independent directors. 1 Introduction In today s business environment filled with rapid change innovation is central to entrepreneurship action and as such it can sustain the competitive advantage and enhance the performance of many firms Dalziel Gentry Bowerman 2011 . Many environmental and organizational factors influence a firm s commitment to innovation Daellenbach McCarthy Schoenecker 1999 . Among the organizational factors some 1Department of Finance National .

• Quản trị kinh doanh
• R&D investment
• CEO tenure
• Independent directors
• Corporate innovation
• Monitoring effectively