The effect of independent directors' characteristics on firm performance: Tenure and multiple directorships

In this paper, we analyze how the tenure and the number of directorships of independent directors may influence the relationship between board independence and firm performance. Our sample is composed of US listed firms for the period 2008-2012. Several robustness checks and sensitivity analyses are performed and we confirm that the board's independence positively influences the firm's performance. Nevertheless, this relationship exists only under certain values of directors' tenure and external directorships. Our findings show that these variables determine the effectiveness of independent directors. Therefore, this paper highlights the need for a more specific approach, based on the personal characteristics of independent directors, in order to study their influence on corporate decisions, strategy and outcomes. Furthermore, our evidence has direct implications for companies in the selection of board members.