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DO INVESTORS TAKE DIRECTORS' AGE, TENURE, AND THEIR HOMOGENEITY INTO ACCOUNT?

INTRODUCTION

Parallel to studies on directors' independence, the representation of women, and CEO/Chairman duality, this study is intended to examine whether investors take directors' age and tenure and age and tenure homogeneity into account. For some time now, directors' age and tenure have been a focus of attention since a majority of directors at firms with annual elections are elected with at least 90% of the vote. However, there are still many directors dissatisfied with their board's composition (Cloyd, 2013). According to a PWC study (2015) of 783 public company directors, nearly 40% of those directors interviewed felt that some member of their board should be replaced. The main reasons for this dissatisfaction range from diminished performance due to aging to unpreparedness for meetings and lack of expertise (PWC, 2015). Thus, the question of whether directors' age and the number of terms they serve should be capped appears to be a valid one.

It is from this perspective that this study examined whether investors take account of directors' age and tenure and the homogeneity of their age and tenure, using an empirical version of the Ohlson model (1995) and a sample of Canadian firms listed on the Toronto Stock Exchange (for fiscal years 2012 to 2015 inclusively). The findings tend to show that investors do not take age and age homogeneity into account. Conversely, they attach importance to tenure and tenure homogeneity. These results can contribute to discussions on regulating the information organisations are required to disclose about their directors' age, tenure and term of tenure. To our knowledge, few countries have set limits on the age or term of directors of listed firms, although debate on this issue has become increasingly common. In Canada, the Canadian Securities Administrators of seven provinces (out of 10) and two territories (out of three) require organisations that solicit a proxy from a security holder or the issuer for the purpose of electing directors to disclose in its documentation:
"...whether or not the issuer has adopted term limits for the directors

on its board or other mechanisms of board renewal and, if so, include a

description of those director term limits or other mechanisms of board

renewal. If the issuer has not adopted director term limits or other

mechanisms of board renewal, disclose why it has not done so

(Regulation 58-101 Respecting disclosure of corporate governance

practices)."


Our study findings support this regulatory initiative requiring the board to disclose whether or not the firm has adopted term limits for directors. Moreover, they confirm that investors attach less value to firms whose directors' terms are shorter than average and firms where directors' tenure is more heterogeneous. In other words, they attach greater value to the shares of firms whose directors have longer than average terms of tenure. Organisations interested in increasing their market value should thus consider these results when nominating and electing their directors.

This article is broken down into four sections. The first presents the relevant literature, followed by sections on the research design and the study's sample and data collection. A third section discusses the study results, while the final section sums up the article, addresses the study's limitations and presents potential avenues for future research.

THEORETICAL BACKGROUND

Corporate governance issues came to light with the separation of ownership and control noted by Berle and Means in their studies in 1932 (Berle & Means, 1932). In fact, it was the growing size of organisations that triggered this separation. Because the thousands and even hundreds of thousands of investors who own shares in public companies cannot collectively make the day-to-day decisions needed to operate a business (Kim, Nofsinger, & Mohr, 2010), they hire managers. However, since managers and shareholders do not necessarily share the same goals, agency problems may arise.

For example, managers may seek self-serving gratification in the form of perks, power, and/or fame (Kim, Nofsinger, & Mohr, 2010). To prevent these potential abuses, relations between investors and managers are governed by contracts (Jensen & Meckling, 1976), which may however sometimes be flawed (Shleifer & Vishny, 1997). Since managers' actions cannot always be monitored, moral hazard problems may occur (Scott, 2015). As well, managers have more information about a firm's current realities and future prospects than investors, leading to a problem of adverse selection that may favour the former (Scott, 2015). Several studies have documented the prevalence of managerial behaviour that does not serve investors' interests (Shleifer & Vishny, 1997). Others have addressed mechanisms for mitigating agency problems, such as executive compensation contracts, legal rules, large investors, creditors, rating agencies, accountants and auditors. In fact, a major portion of corporate governance research targets these mechanisms.

Corporate boards of directors are another mechanism that can mitigate agency problems between investors and managers. Past studies attribute the following four roles to boards of directors: monitoring, service, strategy and resource provision (Daily, Dalton, & Cannella, 2003; Zahra & Pearce, 1989; Ong & Wan, 2008). The first entails directors monitoring managers as fiduciaries of stakeholders. In this role, their responsibilities include hiring and firing the CEO and other senior executives, determining executive pay, and otherwise overseeing managers to ensure they do not expropriate stockholders' interests (Johnson, Daily, & Ellstrand, 1996). The next two, service and strategy, are often combined. They include the advisory services that directors must provide to senior executives, as well as support for strategic planning and the implementation of corporate strategic plans (Johnson, Daily, & Ellstrand, 1996). Lastly, resource provision refers to the directors' ability to bring resources, such as legitimacy, experience, relationships with important stakeholders and access to capital, to the firm (Ong & Wan, 2008).

A number of studies have examined whether the characteristics of boards and/or directors affect boards' efficiency and firms' financial performance. Outside directors have been one of the characteristics most frequently studied. In theory, they are supposed to monitor managerial opportunism, while bringing a diversity of perspectives and expertise to support strategy formulation and implementation (Johnson, Daily, & Ellstrand, 1996). An outside director is also seen as a director who can bring resources to the firm (Johnson, Daily, & Ellstrand, 1996). However, meta-analyses seeking to establish a link between structural and compositional characteristics of boards, for instance, board size, CEO/Chairman duality, ratio of outside/inside directors and financial performance (Johnson, Daily, & Ellstrand, 1996; Dalton et al., 1999; Hermalin & Weisbach, 1991; Dalton & Dalton, 2011) have proven to be inconclusive (McNulty, 2014). According to McNulty (2014), these results confirm the need to study other variables and processes that could explain a board's performance and impact at the firm level (Daily, Dalton, & Cannella, 2003; Finkelstein, Hambrick, & Cannella, 2009; Pugliese et al., 2009).

Directors' age and tenure and age and tenure heterogeneity are other characteristics that can influence their performance even though previous studies have considered these attributes less important.

Average Age of Board Members

According to Nguyen, Hagendorff, and Eshraghi (2015), the age of the appointees could impact their decision-making capability, risk-taking behaviour, career concerns and economic incentives. These authors found that older appointees have more decision-making experience, less career uncertainty and fewer incentives to improve their job security. As a result, they are less likely to engage in excessively risky activities. Younger directors have more energy, drive and ideas, are quicker at learning new technologies and likely to favour innovative decisions (Nguyen, Hagendorff, & Eshraghi, 2015). A few studies have in fact found that the age of senior executives and board members seems to influence various firm variables. Wiersema and Bantel (1992), for example, found that members of the top management of firms most likely to change their corporate strategy have lower average and shorter organisational tenure. From this perspective, a younger board would likely more rapidly respond to change and develop better strategies, which should translate into greater future cash flows and higher share prices. However, Bantel and Jackson (1989) observed no relationship between the average age and age heterogeneity of top management and innovation.

Focusing more specifically on directors' age and using a broader measure of performance, Wang, Lu, and Lin (2012) found no correlation between directors' age and the performance of bank holding companies. Tompkins and Hendershott (2012) noted a highly positive and significant correlation between the average age of a board of directors and the probability of takeover. In their view, older directors are less prone to agency problems and more willing to make decisions that could result in the loss of their board seat. They also found that takeover offers create a conflict of interest between shareholders and directors and that, although mergers generally create value for shareholders, they often lead to directors losing their seats. Core, Holthausen, and Larcker (1999) observed a positive correlation between CEO compensation and outside directors over age 69. They believe this finding to be due to greater laxity on the part of older directors. Larker, Richardson, and Tuna (2007) found no evidence of a link between directors' age and financial performance measured by return on assets (ROA) or future stock returns. However, they noted a negative correlation with the absolute value of abnormal accruals. Accordingly, older directors would appear to be associated with less earnings management.

Similarly to Larcker, Richardson, and Tuna (2007), McIntyre, Murphy, and Mitchell (2007) did not find any significant correlation between the average age of the board and the increase in Tobin's Q, the economic value added and the return on assets. Lastly, Grove, et al. (2011) observed a negative and significant relationship between the average director age and excess return, but only for one year even though their study covered three years. To date, the findings of studies on directors' age are less than conclusive and could moreover be explained by the research methodology used. Given that directors' age could theoretically influence their decision-making capability, risk-taking behaviour, career concerns and economic incentives, this variable is likely to impact future cash flows. We suggest applying a different methodology to test this relationship and put forward the following hypothesis:

[H.sub.1] There is a significant negative relationship between firm's market value and the average age of the board directors.

The diversity of age on a firm's board may lead to diverging opinions and a wide variety of ideas since the different age groups have different characteristics. According to Sitthipongpanich and Polsiri (2013), older directors may provide greater steadiness and experiential acumen to board discussions, while younger directors may be more dynamic and less conservative. Sitthipongpanich and Polsiri (2013) also found that older directors tend to be more psychologically committed to the firm, whereas younger directors are better at grasping new ideas and learning new things (Koufopoulos, et al., 2008). Thus, an age-diverse board would make better strategic decisions because of the input of different points of view. These decisions would then translate into better financial performance. Sitthipongpanich and Polsiri (2013) showed a marginally significant correlation between the heterogeneity of the age of directors and firm value (measured by the market to book ratio). Working with a sample of Canadian firms, McIntyre, Murphy, and Mitchell (2007) noted similar results. However, their results were not significant when financial performance was measured by return on assets (ROA) and economic value added (EVA). In light of these mixed results, we put forward the following hypothesis:

[H.sub.2] There is a significant positive relationship between firm's market value and the age homogeneity of the board directors.

Tenure

Directors' tenure is another interesting variable that has seldom been explored in prior research. Baran and Forst (2015) maintain that longer board tenure may benefit a firm because long-serving directors have the time to acquire specific knowledge about the organisation and may thus be able to provide better advice. However, they may neglect their supervisory role since they are more likely to form friendships with management over time (Vafeas, 2003). Furthermore, Barroso, Villegas, and Perez-Carlos (2011) found that long-tenure directors can also develop decision-making routines and be influenced by their own beliefs and schemes when it comes to facing key decisions such as internationalisation strategy or strategic changes. This would thus negatively impact performance because the firm's growth could stagnate. McIntyre, Murphy, and Mitchell (2007) observed that directors' tenure was positively related to a firm's return on assets and economic value added (EVA), although this relationship is somewhat concave. Directors contributions tend to diminish with longer terms of tenure. Deschenes, Rojas, and Morris (2013) found that investors attach value to directors' tenure and that an experienced board will create more value for shareholders. Apart from Deschenes, Rojas, and Morris (2013), few researchers have examined whether investors take directors' tenure into account. Given the diverging positions on the contribution of tenure to financial performance and the few empirical observations available, we put forward the following hypothesis:

[H.sub.3] There is a significant negative relationship between firm's market value and the directors' tenure.

In addition to the issue of tenure itself, tenure heterogeneity is also an interesting variable for analysis. Tenure heterogeneity may be beneficial for firms because it contributes cognitive diversity that can stimulate discussion. However, it can also interfere with the communication process and spark dysfunctional conflict (Bantel & Jackson, 1989). McIntyre, Murphy, and Mitchell (2007) noted that tenure heterogeneity was positively linked to Tobin's Q, but not to economic value added (EVA) or return on assets (ROA). In light of the scarcity of studies on this issue, we propose the following hypothesis:

[H.sub.4] There is a significant positive relationship between firm's market value and the tenure homogeneity of the board directors.

METHODOLOGY

Research design

To examine how investors value directors' age and tenure and age and tenure heterogeneity, we drew on an empirical version of Ohlson's model (1995), similar to those used by Collins, Maydew, and Weiss (1997), Xu, Magnan, and Andre (2007), Venter, Emanuel, and Cahan (2014) and Coulmont and Berthelot (2015). This accounting-based valuation model relates a firm's market value (price of common shares four months after the year-end * number of common shares outstanding) to the book value of its equity and earnings. The model is expressed as follows:

"[mathematical expression not reproducible] (1)

Where,

[MV.sub.it+4] is the market value four months after the year-end; [BV.sub.it] is the book value of common equity; [EARN.sub.it] is the net earnings; [NEG.sub.it] is a dummy variable equal to 1 if the firm's net earnings are negative in year t and 0 otherwise; [INDP.sub.it] is the percentage of independent board members (percentage of the board members who meet the definition of independence of the firm according to the Canadian Securities Administrators); [WOMEN.sub.it] is the percentage of women directors; and [DUALITY.sub.it] is a dummy variable equal to 1 if the CEO is also Chairman of the board and 0 otherwise. The latter are control variables of elements noted in previous studies that could influence the findings.[YEARS12.sub.it], [YEARS13.sub.it] and [YEARS14.sub.it] are dummy variables associated with fiscal years 2012, 2013 and 2014 respectively (equal to 1 if the observation is for the year and 0 otherwise). They are used to control for the potential influence of the observations' year on the results. If, for reasons not addressed in this study, there are differences in the market value of firms operating in these years, they will be captured by these control variables. [[epsilon].sub.it] is the error term.

We then examined the incremental value assigned to the directors' age and tenure and age and tenure homogeneity by adding the variables studied to the equation. [AGE.sub.it] is the average age of board members; SD[AGE.sub.it] is the age heterogeneity of the directors measured by the standard deviation of the age of the board members; [TENURE.sub.it] is the average number of years of tenure of the board members; and SD[TENURE.sub.it] represents the tenure heterogeneity measured by the standard deviation of the tenure of the board members. Equation (1) thus becomes:

"[mathematical expression not reproducible] (2)

Market value was estimated from financial data corresponding to four months after the end of the fiscal year from which the accounting data was taken in order to ensure that information about the characteristics of the board was available to investors and that they could have integrated it into their valuation of the firm. Like Xu, Magnan, and Andre (2007), we expected the coefficients associated with the book value of common equity ([[alpha].sub.1]) and net earnings of the firm ([[alpha].sub.2]) to be positive and significant, and the coefficient associated with an interaction variable that is the product of net earnings and the dummy variable NEG ([[alpha].sub.3]) to be negative and significant. This interaction term is included to take account of the different coefficients associated with positive and negative net earnings. The variables [AGE.sub.it] and SD[AGE.sub.it], representing the average age and the standard deviation of the directors' age respectively, are intended to test hypotheses [H.sub.1] and [H.sub.2]. If investors take directors' age and their age heterogeneity into account, coefficient [[alpha].sub.10] should be negative and significant, while coefficient [[alpha].sub.11] should be positive and significant. The [TENURE.sub.it] and SD[TENURE.sub.it] variables, representing the average tenure and tenure heterogeneity, are intended to test hypotheses [H.sub.3] and [H.sub.4]. If investors take these variables into account, [[alpha].sub.12] and [[alpha].sub.13] should also be negative and positive respectively and significant.

Sample and Data Collection

Firms in the sample are drawn from the Toronto Stock Exchange S&P/TSX composite index. The goal was to obtain a sizeable sample of firms that provide data about the characteristics of their board of directors, being well aware that information about directors' age and tenure is not always available. After examining just under half the firms listed on the Toronto Stock Exchange S&P/TSX composite index that disclose the age and tenure of their directors, we collected data for four fiscal years (2012 to 2015). Of the 461 observations from which all the data was collected, 118 apply to 2012, 119 to 2013, 117 to 2014 and 107 to 2015. Table 1 presents the distribution of firms by sector. The energy (27%) and materials sector (21%) account for half the firms in the sample, followed by the financial (14%) and industrial sectors (12%).

The financial and accounting data needed to perform the statistical analysis, i.e., market value ([MV.sub.it+4]), the book value of common equity ([BV.sub.it]) and the net earnings ([EARN.sub.it]), was extracted from the Compustat Research Insight database. Information about board members (age, tenure, independence, gender) was retrieved manually from proxy circulars available on SEDAR.com. This site is an official site providing access to most public securities documents filed by firm issuers with the 13 Canadian provincial and territorial securities regulatory authorities.

RESULTS

Descriptive Statistics

The descriptive statistics of the firms included in the sample are presented in Table 2. These firms are relatively large, with an average market value of CAD$9.3 billion (median = 3.4 billion). The average book value of their common equity is CAD$5.3 billion (median = 2.1 billion) and the average net earnings is CAD$369 million (median = 130.1 million).

Table 3 presents the correlation coefficients for the variables included in equations 1 and 2. As expected, the correlation coefficients for these variables are high between the market value ([MV.sub.it+4]) and the book value ([BV.sub.it]) and net earnings ([EARN.sub.it]) of the firms. The correlation coefficients of the control variables [INDP.sub.it] and [WOMEN.sub.it], representing the percentage of independent directors and the percentage of women directors respectively, are weakly but significantly and positively correlated with the financial variables ([MV.sub.it+4], [BV.sub.it] and [EARN.sub.it]). As concerns the correlation coefficients of the variables associated with age ([AGE.sub.it] and SD[AGE.sub.it]) and tenure ([TENURE.sub.it] and SD[TENURE.sub.it]), only those between the average age of directors ([AGE.sub.it]) and the firms' market value ([MV.sub.it+4]) and book value ([BV.sub.it]) are positive and significant.

The latter are however relatively low (0.172 and 0.197). The correlation coefficient between the tenure heterogeneity (SD[TENURE.sub.it]) and the book value of the firm ([BV.sub.it]) is also positive, but marginally significant. Overall, Table 3 does not show sufficiently high correlations to potentially cause problems of multicollinearity in the regression analyses.

Analyses

Table 4 presents the results of the regression analysis for Models 1 and 2, plus two other complementary analyses. We ran least squares regressions. As expected with the correlation analyses, the multicollinearity between the independent variables is not seen as problematic. In fact, the variance inflation factor (VIF) obtained by the collinearity diagnostic for all independent variables is under 5. These values are within the prescribed threshold of [1, 10] proposed by Hair, et al. (2009). In addition, we ran the Durbin Watson statistic for autocorrelation problems. The Durbin Watson obtained for all models was close to 2 meaning that autocorrelation does not seem to be problematic.

The first model (M1) of our analysis shows that, as expected, coefficients associated with the book value of common equity ([BV.sub.it]) and net earnings ([EARN.sub.it]) are positive and highly significant. The coefficient associated with the interaction variable resulting from the product of the net earnings and the dummy variable [NEG.sub.it] (1 if the firm had negative earnings and 0 otherwise), i.e. [EARN.sub.it]*[NEG.sub.it] is negative and highly significant. The coefficient associated with the percentage of independent board members ([INDP.sub.it]) is positive and marginally significant, while those associated with the percentage of women on the board ([WOMEN.sub.it]) and CEO/Chairman duality ([DUALITY.sub.it]) are not significant. The coefficients associated with the variables ([YEAR12.sub.it], [YEAR13.sub.it], [YEAR14.sub.it]) used to control for the potential influence of the observations' year on the results are generally not significant. Together, these nine dependent variables and the constant explain 80.7% of the variance of the firms' market value (adjusted [R.sup.2]). In terms of this variance explanation, this first model is very similar to the findings of Collins, Maydew, and Weiss (1997), Xu, Magnan, and Andre (2007), Venter, Emanuel, and Cahan (2014) and Coulmont and Berthelot (2014).

The second model (M2) examines the level of significance provided by adding new variables to the equation. The coefficient of the variable representing the average age of directors ([AGE.sub.it]) and that associated with age heterogeneity (SD[AGE.sub.it]) are not significant. The findings do not therefore appear to support Hypotheses [H.sub.1] and [H.sub.2]. Furthermore, the coefficient associated with tenure ([TENURE.sub.it]) is positive and marginally significant, contrary to hypothesis H3. The analyses results tend instead to indicate that investors positively perceive the higher average tenure of directors. As for tenure heterogeneity measured by the standard deviation of the tenure of the board members (SD[TENURE.sub.it]), the coefficient associated with this variable is negative and significant contrary to our predictions. This result does not support hypothesis [H.sub.4]. There is a slightly significant increase in the percentage of the explained variance in market value (adjusted [R.sup.2]), now at 80.9%, with the addition of these variables. The difference between the adjusted [R.sup.2] statistics is marginally significant (F-test improved fit = 1.965).

The results in the second model (M2) signal that investors negatively perceive tenure heterogeneity measured by the standard deviation of the tenure of the board members (SD[TENURE.sub.it]), but positively view the average number of years of tenure of the board ([TENURE.sub.it]). The analyses therefore indicate that investors have a negative perception of significant discrepancies in board members' tenure, while, at the same time attaching value to tenure. These findings thus seem to support the possibility that investors value directors who are more knowledgeable about the firm because they have been there longer. Shareholders appear to attach more value to the directors' role as strategic advisor than as oversight advisor. It is also interesting to note that tenure and tenure heterogeneity appear to be reflected in share value. In fact, these findings suggest that these board characteristics are value relevant for investors.

Lastly, the hypotheses respecting directors' age and age heterogeneity are not supported by the analyses results, which are consistent with those of McIntyre, Murphy, and Mitchell (2007) and Larker, Richardson, and Tuna (2007), who found that financial performance does not seem to be linked to directors' age. Thus, if ties exist, they are not significant enough to be reflected in share value.

The third (M3) and fourth (M4) models provide interesting insight into the link between a firm's market value and the average number of years of tenure ([TENURE.sub.it]). In model 3, the ([TENURE.sub.it]) variable was a dummy variable (PT50[TENURE.sub.it]) equal to 1 if the average number of years of tenure of the board members is lower than the median of the average number of years of tenure of the directors of all the boards included in the sample and 0 otherwise. This variable thus represents the average number of years of tenure of directors who have fewer years of tenure than the median tenure of the directors in the sample as a whole. As the findings presented in column 4 of Table 4 illustrate, the coefficient associated with the less senior directors (PT50[TENURE.sub.it]) is negative and significant (p<0.05). In other words, according to these results, share value is lower when the average tenure is less than the median of 8.08 years. However, share value is considered higher when the average tenure is greater than the median, as illustrated in model 4 where the ([TENURE.sub.it]) value was a dummy variable (PT50to100[TENURE.sub.it]) equal to 1 if the average number of years of tenure is higher than the median and 0 otherwise (i.e., the opposite of the PT50[TENURE.sub.it] variable in the model (M3)). It thus seems that investors attach some importance to directors' tenure and that their perception of its value increases as the number of years of tenure increases. The relationship noted is therefore more complex that first supposed.

CONCLUSION

The aim of this study was to examine whether investors attach importance to certain directors' characteristics, specifically age and tenure and age and tenure heterogeneity. Our findings indicate that investors take only tenure and tenure heterogeneity into account. The relationship between market value and average tenure is not linear but forms a curve. In fact, our results show a negative relationship between the market value and the short-tenure of directors and the reverse (positive relationship) for periods of seniority greater than the median of the sample (more than 8.08 years according to our analyses). Therefore, there seems to be a point where investors perception of tenure changes. Furthermore, investors negatively perceive a high degree of tenure heterogeneity. Lastly, investors do not appear to take directors' age or their age heterogeneity into account.

This study contributes new observations that underscore the importance of directors' tenure to investors. The relationships noted may reflect directors' broader knowledge of the firm and increased support of senior management from a strategic perspective. In recent years, the oversight role of the board of directors has received considerable attention, particularly from regulatory authorities. Our analyses results tend to support the notion that directors' tenure, as well as their independence, may be a significant factor in ensuring an organisation's success and long-term survival. Our results point up the importance of further study to understand the influence of directors' tenure on firms' financial performance and governance practices before introducing any regulation to limit tenure terms.

This study has certain limitations. Owing to the lack of information available on directors' age and tenure, the sample was made up of 119 firms. As well, since the analyses are limited to a sample of Canadian firms, the findings cannot be representative of the results that could be obtained from other firms or in other legislative or cultural contexts.

It could be worthwhile examining whether investors take other directors' characteristics, such as their area of expertise and education, into account. Previous studies (Bantel & Jackson, 1989) show that certain characteristics are associated with significant actions or events. For instance, Bantel and Jackson (1989) noted that directors' level of education and the diversity of their functional areas of expertise are associated with innovation. To date, few studies have explored the potential impact of directors' characteristics on the various roles they have to play.

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About the Authors:

Sylvie Berthelot is Accounting Professor at the Universite de Sherbrooke. She has written several articles and made more than 100 presentations at numerous academic conferences. She is a Fellow of the Chartered Professional Accountant of Canada and a member of the Ordre des comptables professionels agrees du Quebec. She is also director of the Research group on corporate social responsibility (G2RSO). Her research interests focus mainly on fields related to sustainable development, corporation governance and accounting standards.

Michel Coulmont is Accounting Professor at the Universite de Sherbrooke. He has written several articles and made numerous presentations at academic conferences. He is also a member of the Research group on corporate social responsibility (G2RSO). His research interests focus on corporation governance and sustainability disclosures.

Anne Marie Gosselin is a DBA Student at the Universite de Sherbrooke. Her research doctorate focus mainly on fields related to corporate social responsibility.
Table 1
Descriptive Sectors

Sector                      Number  % of sample

Consumer Discretionary          38         8.24%
Consumer Staples                25         5.42%
Energy                         126        27.33%
Financial                       63        13.67%
Industrials                     55        11.93%
Information Technology          19         4.12%
Materials                       97        21.04%
Telecommunication Services      10         2.17%
Utilities                       28         6.07%
Total                          461       100.00%

Table 2
Descriptive Statistics (N=461)

Variables               Mean          SD     Median      Minimum

[MV.sub.it+4]      9,288.945  14,398.789  3,427.208       27.060
[BV.sub.it]        5,325.412   8,547.959  2,068.000       11.160
[EARN.sub.it]        369.132   1,493.670    130.100  -10,678.700
[INDP.sub.it]          0.788       0.123      0.818        0.330
[WOMEN.sub.it]         0.147       0.112      0.143        0.000
[AGE.sub.it]          62.390       3.240     62.430       51.000
SD[AGE.sub.it]         7.459       2.011      7.181        3.310
[TENURE.sub.it]        8.160       3.145      8.080        1.000
SD[TENURE.sub.it]      6.225       3.423      5.916        0.000

Variables              Maximum

[MV.sub.it+4]      100,733.610
[BV.sub.it]         62,718.000
[EARN.sub.it]        7,912.000
[INDP.sub.it]            1.000
[WOMEN.sub.it]           0.550
[AGE.sub.it]            74.000
SD[AGE.sub.it]          14.170
[TENURE.sub.it]         21.000
SD[TENURE.sub.it]       16.220

Financial figures are presented in millions of Canadian dollars.
[MV.sub.it+4] is the market value of the firm's common shares

outstanding four months after the fiscal year-end t; [BV.sub.it] is the

book value of the firm's common equity at the fiscal year-end t;

[EARN.sub.it] is the net earnings of fiscal year t available for common

shareholders of firm i; [INDP.sub.it] is the percentage of independent

board members of firm i at the end of year t; [WOMEN.sub.it] is the

percentage of women on the board for firm i during year t; [AGE.sub.it]

is the average age of the board members of firm i at the end of year t;

SD[AGE.sub.it] is the board age heterogeneity measured by the standard

deviation of the age of the board members of firm i at the end of year

t; [TENURE.sub.it] is the average number of years of tenure of the

board members of firm i for year t; and SD[TENURE.sub.it] is the tenure

heterogeneity measured by the standard deviation of the tenure of the

board members of firm i at the end of year t.

Table 3
Correlation Coefficients (Value model) (N=461)

Variables  [MV.sub.it+4]  [BV.sub.it]  [EARN.sub.it]  [INDP.sub.it]
               1             2             3              4

1              -
2           .815 (**)       -
3           .666 (**)     .565 (**)        -
4           .238 (**)     .157 (**)     .222 (**)         -
5           .283 (**)     .270 (**)     .233 (**)      .257 (**)
6           .172 (**)     .197 (**)     .052           .225 (**)
7          -.061          .000         -.071          -.230 (**)
8           .027          .049          .015          -.285 (**)
9           .032          .092 (*)      .034          -.227 (**)

Variables  [WOMEN.sub.it]  [AGE.sub.it]  SD[AGE.sub.it]  [TENURE.sub.it]
               5              6             7               8

1
2
3
4
5              -
6           .098 (*)          -
7          -.055           .198 (**)        -
8           .049           .381 (**)     .281 (**)          -
9           .163 (**)      .435 (**)     .405 (**)       .805 (**)

Variables  SD[TENURE.sub.it]
                    9

1
2
3
4
5
6
7
8
9                   -

(**) p [less than or equal to] 0.05; (*) p [less than or equal to] 0.1.

Table 4
Results of the Regression Analysis; Dependent Variable: [MV.sub.it+4].

Independents variables                  M1                 M2

[BV.sub.it]                          0.536 (***)        0.527 (***)
[EARN.sub.it]                        7.608 (***)        7.631 (***)
[EARN.sub.it]*[NEG.sub.it]          -8.793 (***)       -8.794 (***)
[INDP.sub.it]                    4,207.752 (*)      2,175.171
[WOMEN.sub.it]                  -1,026.209            630.087
[DUALITY.sub.it]                   -75.155            186.801
[YEAR12.sub.it]                 -1,442.122 (*)     -1,232.601
[YEAR13.sub.it]                    197.527            281.487
[YEAR14.sub.it]                   -725.737           -627.155
[AGE.sub.it]                                          185.819
SD[AGE.sub.it]                                       -106.940
[TENURE.sub.it]                                       265.089 (*)
SD[TENURE.sub.it]                                    -358.425 (**)
PT50[TENURE.sub.it]
PT50to100[TENURE.sub.it]
Intercept                         -590.753        -10,072.586
R                                    0.901              0.902
[R.sup.2]                            0.811              0.814
Adjusted [R.sup.2]                   0.807              0.809
F-value                            215.270 (***)      150.913 (***)
Incremental adjusted [R.sup.2]                          0.003
F-test improved fit                                     1.965 (*)
Durbin-Watson                        1.931              1.901
No Observation                     461                461

Independents variables                  M3                M4

[BV.sub.it]                          0.535 (***)       0.535 (***)
[EARN.sub.it]                        7.610 (***)       7.610 (***)
[EARN.sub.it]*[NEG.sub.it]          -8.847 (***)      -8.847 (***)
[INDP.sub.it]                    3,881.568         3,881.568
[WOMEN.sub.it]                     198.558           198.558
[DUALITY.sub.it]                    80.307            80.307
[YEAR12.sub.it]                 -1,451.617 (*)    -1,451.617 (*)
[YEAR13.sub.it]                    164.419           164.419
[YEAR14.sub.it]                   -709.674          -709.674
[AGE.sub.it]
SD[AGE.sub.it]
[TENURE.sub.it]
SD[TENURE.sub.it]                 -272.179 (**)     -272.179 (**)
PT50[TENURE.sub.it]             -1,907.114 (**)
PT50to100[TENURE.sub.it]                           1,907.114 (**)
Intercept                        2,119.952           212.839
R                                    0.902             0.902
[R.sup.2]                            0.814             0.814
Adjusted [R.sup.2]                   0.810             0.810
F-value                            178.820 (***)     178.820 (***)
Incremental adjusted [R.sup.2]       0.003             0.003
F-test improved fit                  3.605 (**)        3.605 (**)
Durbin-Watson                        1.903             1.903
No Observation                     461               461

(***) p[less than or equal to] 0.001; (**) p [less than or equal to]

0.05; (*) p [less than or equal to] 0.1 (two-tail).
[DUALITY.sub.it] is a dummy variable equal to the value of 1 if the CEO

is also Chairman of the board and 0 otherwise; [YEAR12.sub.it] is a

dummy variable controlling the fiscal year 2012; [YEAR13.sub.it] is a

dummy variable controlling with fiscal year 2013; [YEAR14.sub.it] is a

dummy variable controlling the fiscal year 2014; SR[TENURE.sub.it] is

the square root of the average number of years of tenure of the board

of directors of firm i for year t; PT50[TENURE.sub.it] is a dummy

variable equal to 1 if the average tenure is lower than the median of

the average tenure for all firms in the year t and 0 otherwise; and

PT50to100[TENURE.sub.it] is a dummy variable equal to 1 if the average

tenure is greater than the median of the average tenure for all firms

in the year t and 0 otherwise.
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Author:Berthelot, Sylvie; Coulmont, Michel; Gosselin, Anne Marie
Publication:International Journal of Business, Accounting and Finance (IJBAF)
Date:Mar 22, 2019
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