The relationship between board tenure and firm performance and the moderating effect of CSR - A study on Swedish listed firms

Abstract: We investigate whether average board tenure influences firm performance in Swedish listed firms during the period 2007-2019. We hypothesize that the trade-off between knowledge accumulation and loss of independence over the tenure motivates an inverted U-shaped association. We find no evidence of a curvilinear association between average board tenure and firm performance. Our findings may potentially be attributed to the contextual differences arising from the Swedish market. In addition, not isolating the hypothesized effect on outside directors and a skewed dataset towards larger firms might complicate the interpretation of our results. Moreover, we hypothesize that the relationship between board tenure and firm performance is positively moderated by Corporate Social Responsibility (CSR) performance, since high-performing CSR firms may have a stronger ethical culture at the board level. However, our results do not support our hypothesis. The lack of significance may potentially arise from the difficulty of disentangling the theoretical mechanism of an ethical firm culture using CSR.