The ascension of executives' tenure, corporate risk-taking and corporate performance: evidence from Malaysia

• Published in: Asia-Pacific journal of business administration 2022-01, Vol.14 (1), p.101-123
• Main Authors: Atayah, Osama F, Najaf, Khakan, Subramaniam, Ravichandran K, Chin, Phaik Nie
• Format: Article
• Language: English
• Subjects: Age; Appointments & personnel changes; Boards of directors; Chief executive officers; Corporate governance; Directors; Executive compensation; Gender; Hypotheses; Influence; Skills; Tenure
• ISSN: 1757-4323; 1757-4331
• DOI: 10.1108/APJBA-05-2021-0189

PurposeThis study aims to investigate the implication of top executives’ number of years of experience (tenure) on corporate risk-taking behaviour and corporate performance in Malaysian corporations.Design/methodology/approachTo test the hypothesis efficiently, the authors have extracted the data from Bloomberg for 788 listed companies of the Malaysian Stock Exchange. The methodology entails ordinary least squares regressions, quantile regression and dynamic system generalized method of moments model.FindingsFirst, the authors show that executive management tenure has a significant negative relationship with corporate risk-taking. It means that the long-tenured executives tend to undertake less risky strategies and decisions. Second, this study reveals that the longer executive management tenure has a positive relationship with corporate performance. Third, the moderating effect of corporate risk-taking with executive tenure (Tenure dummy*Risk) has a negative relationship with the corporate performance by 1%.Practical implicationsIt implies that the appointment of experienced executive management contributes towards corporate performance directly. However, experienced management trends take less risk, which eventually results in mitigating the corporate performance. On that basis, the findings are significant in highlighting the usefulness of executive leadership term and offers insights to academics, practitioners and policymakers.Originality/valueThis paper is novel since it is unique in evaluating the executive tenure and the preferences to handle risk strategies and how that impact the firm performance.