eThesis - School of Business electronic theses

This thesis aims at presenting empirical evidence about the association between board director tenures and characteristics of the firm and individual directors in the Finnish context. Existing literature related to board tenures is very scarce, and I thus intend to provide new information and empirical evidence, and contribute to literature about this aspect board structure.

The data of this thesis consists of a hand-picked sample of public companies that were listed in the Helsinki Stock Exchange during years 2005-2012. The final sample covers an eight year period, 113 companies, 871 firm years and 5358 observations of individual directors in total. Data came from annual reports, financial statements, company webpages, and minutes of annual general meetings of the sample companies, and databases of Euroclear Finland and ThomsonReuters. The sample is further divided into subsamples based on board tenure length: triads of directors are constructed so that each triad includes directors that belong to the same firm year, and the most senior, median and junior director in terms of tenure are selected. The phenomenon of board director tenures is studied with altogether three different methods. The triads of directors are analyzed following the approach presented by Vafeas (2003), i.e. by conducting univariate comparisons and logistic regressions with the subsamples of director triads. This is done in order to account for tenure diversity that summary statistics and averages applied in other methods may not adequately capture. In ad-dition, ordinary least squares (OLS) regression analysis is applied to both the observations of the firm years and individual directors.

The descriptive results of this study provide new information about board director tenures and other board characteristics of Finnish public companies that have not been gathered and presented before. Regarding the results obtained by applying several methods of data analysis, I find evidence both supporting and contradicting my hypotheses. I find strong empirical support consistent with the hypothesis and previous literature suggesting that director independence is associated with shorter tenures, whereas greater director ownership in firm equity seems to be the key factor tying directors to certain boards and lengthening the tenures. In addition, I find that there is substantial correlation between CEO tenure board director tenure. Moreover, the results imply that greater average number of committee seats in the board and more additional board seats are associated with shorter tenures. According to the results, female directors have shorter tenures than male directors, and average board tenures are shorter in governmentally owned firms, larger firms, and firms with a more concentrated ownership structure.