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Long-tenured CEOs and firm Pacific

Accounting
performance: too much of a good Review

thing? Evidence from New Zealand

Panwell Chikunda, Md. Borhan Uddin Bhuiyan and
Muhammad Nurul Houqe Received 30 September 2024
School of Accountancy, Economics and Finance, Massey University, Revised 9 February 2025
Accepted 13 March 2025
Auckland, New Zealand, and
Linh Thi My Nguyen
Department of Economics and Finance, The Business School, RMIT University,
Ho Chi Minh City, Vietnam

Abstract
Purpose – This study aims to investigate the association between chief executive officer (CEO) tenure and firm
performance. Extended CEO tenure offers the potential for organizational stability, sustained operational
coherence and heightened insights into business intricacies. However, longer tenure concurrently fosters
complacency and impedes innovation by engendering resistance to change and a deficiency in novel perspectives.
The authors’ inquiry seeks to discern the prevailing influence between these contrasting perspectives.
Design/methodology/approach – This study uses unbalanced panel data for a unique hand-collected
dataset from listed firms in New Zealand (2000–2020) – a country that adopts the principles-based corporate
governance regime. The authors perform ordinary least squares, two-stage least squares and propensity score
matching tests to examine the relationship between CEO tenure and firm performance.
Findings – The authors document a significant positive impact of CEO tenure on firm performance, implying
the benefits of long tenure. However, this study further reveals a significant inverted U-shaped relationship
between CEO tenure and firm performance, suggesting that such a positive impact can hold up to a certain
threshold; after that, long CEO tenure can hinder firm performance. The finding is robust to alternative measures
and endogeneity tests and offers important implications for corporate governance policies and practices.
Practical implications – The findings highlight the importance of balancing the benefits of long CEO
tenure. Practically, firms should prioritize regular evaluation of CEO performance and tenure, emphasize
succession planning and foster a culture of innovation to sustain organizational success in the long term.
Originality/value – This research offers valuable insights by examining the intricate relationship
between CEO tenure and firm performance within the distinct setting of New Zealand. By uncovering both
the benefits and drawbacks of long CEO tenure, this study contributes to a nuanced understanding of
corporate governance dynamics.
Keywords CEO tenure, Firm performance, New Zealand
Paper type Research paper

© Panwell Chikunda, Md. Borhan Uddin Bhuiyan, Muhammad Nurul Houqe and Linh Thi My
Nguyen. Published by Emerald Publishing Limited. This article is published under the Creative
Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create
derivative works of this article (for both commercial and non-commercial purposes), subject to full
attribution to the original publication and authors. The full terms of this licence may be seen at http://
[Link]/licences/by/4.0/legalcode Pacific Accounting Review
The authors sincerely thank Guest Editor Cuong Cao Nguyen and the two anonymous reviewers for Emerald Publishing Limited
0114-0582
their insightful and constructive feedback on an earlier version of this manuscript. DOI 10.1108/PAR-09-2024-0235
PAR 1. Introduction
We examine the association between chief executive officer (CEO) tenure and firm
performance, a topic of considerable interest among scholars and industry practitioners
worldwide. Among top managers in a firm, the CEO, the key decision-maker with the “least
restrictive oversight”, tends to have more discretion to exhibit personal preferences in the
firm’s behaviours, potentially changing firm outcomes (Hambrick and Gregory, 1991). This
research line has long been established in the literature as informed by two prominent
theories: the agency theory (Jensen and Meckling, 1976) and the upper echelons theory
(Hambrick and Mason, 1984). CEO tenure, defined as “the time a person spends in the CEO
position” (Darouichi et al., 2021, p. 661), is considered a central characteristic that can
predict both the behaviours and givens of CEOs (Hambrick and Mason, 1984). How does
CEO tenure affect firm performance? Should CEOs stay long in the office? Addressing these
questions enhances our comprehension of CEO tenure’s nature and ramifications on firm
performance and offers valuable insights into corporate governance policies and practices
(Brochet et al., 2021; Darouichi et al., 2021).
Theoretically, long-tenured CEOs tend to understand the firm better, learn more relevant
knowledge and skills and develop long-term relationships with shareholders, reducing
agency conflicts and adding more value to the firm (Eisenhardt, 1989; Hambrick and
Gregory, 1991). However, staying too long in the office can make CEOs more powerful and
resist shareholder requests, creating more conflicts of interest and hindering firm
performance (Cao et al., 2021; Hambrick and Gregory, 1991; Miller, 1991). The empirical
evidence is inconclusive, given the two competing views (Cao et al., 2021; Darouichi et al.,
2021). Studies have documented a mixed linear relationship between CEO tenure and firm
performance (Miller, 1991; Salancik and Pfeffer, 1980). Others show evidence of a
curvilinear impact (Brochet et al., 2021).
Moreover, most past research focuses on the US market (Brochet et al., 2021), and very
few studies investigate smaller countries with unique institutional settings, such as New
Zealand (Prevost et al., 2002). In their recent study, Burns et al. (2023) find that cultural,
legal, regulatory and governance differences across countries are significantly related to
CEO contracts with the firm. Aguilera and Jackson (2003) also argue that due to distinct
institutional environments, corporate governance practices become more similar within a
country but different across countries (Aguilera and Jackson, 2003). Consequently, it is
insufficient to fully comprehend the dynamics of CEO tenure and its effect on firm
performance by depending only on US-based research. Investigating the New Zealand
setting may broaden our perspective of corporate governance dynamics and acquire a more
nuanced understanding of how CEO tenure functions within various institutional contexts.
We selected New Zealand as our research setting to explore our inquiry, distinguishing
our approach from prevalent empirical research that predominantly focuses on the
association between CEO tenure and firm performance within the context of US firms. Our
research motivation is grounded in contextualizing the New Zealand business environment
and differentiating our study from prior research findings in several key aspects. New
Zealand diverges from the USA in fundamental ways. First, the corporate governance regime
in New Zealand is principles-based, as opposed to the rule-based regime in the USA (Wu
et al., 2022). In countries with principles-based corporate governance, instead of governance
rules, firms use commonly respected principles and norms (Sama and Shoaf, 2005). Indeed,
in New Zealand, corporate governance guidelines are not compulsory (Sharma et al., 2021),
thus, CEOs may be under less pressure and oversight than their peers in the USA or other
rule-based countries. Second, New Zealand’s cultural values are also different from those in
the USA. For example, compared to the US culture, the New Zealand culture is characterized
by lower individualism [1]. Burns et al. (2023) document that low individualism is Pacific
associated with lower CEO turnover, which may contribute to longer CEO tenure or Accounting
influence the CEO tenure–firm performance relationship. Third, from a regulatory Review
perspective, we also observe significant differences between the two countries, particularly
in the legal standards towards protecting shareholders, which can influence CEO contracts
and the link between CEO and firm performance (Burns et al., 2023). Notably, New Zealand
has a higher (revised) anti-directors rights index (ADRI) index than the USA (Spamann,
2010), suggesting more shareholder protections in the country. Fourth, the CEO labour
market in New Zealand is relatively smaller than that of the USA, as highlighted by Reddy
et al. (2015). In addition, Ward (2014) provides evidence suggesting that CEO turnover in
New Zealand firms is significantly shorter than in their US counterparts. Consequently,
caution should be exercised when generalising US-based research findings in New Zealand.
Finally, US firm characteristics are also significantly different from those in New Zealand,
which are shown to influence corporate governance structure (Monem, 2013). For example,
firms in the US market are usually much larger than those in New Zealand (La Porta et al.,
1998). In sum, such differences suggest that extant findings about CEO tenure and its
relationship with firm performance in the USA or other countries may not be generalizable to
New Zealand.
In this paper, we use a rich hand-collected data set from the New Zealand market over
20 years (2000–2020) to examine the relationship between CEO tenure and firm
performance. We find supporting evidence for a significantly positive relationship between
CEO tenure and firm performance measured by Tobin’s Q, including additional proxies such
as ROA and basic earning power (BEP). To address potential endogeneity problems, for
example, CEO tenure and firm performance may be correlated with some omitted variables
(omitted variable bias) or the sample selection biases which can arise from our manual data
collection, we conduct several additional tests, including lagged variables, firm fixed effects
and change analysis, the propensity score matching (PSM) and Heckman selection analyses
(Hill et al., 2020). Our findings remain valid. Furthermore, informed by the theoretical work
of Hambrick and colleagues (Hambrick and Gregory, 1991) and recent empirical evidence
(Brochet et al., 2021; Huang and Hilary, 2018), we also test if there is a curvilinear
relationship between CEO tenure and firm performance. CEOs can learn and enhance their
skills and knowledge over time, positively contributing to the firm performance up to a
certain threshold. After that, staying too long in the office can make the CEOs more powerful
and less motivated to learn or engage, becoming detrimental to the firm performance
(Hambrick and Gregory, 1991). Indeed, our study reveals an inverted U-shaped relationship
between CEO tenure and various firm performance measures.
Our study contributes to the literature in several ways. Using a unique hand-collected data
set from a country that follows a principles-based corporate governance regime, we offer
novel empirical evidence on the relationship between CEO tenure and firm performance.
This is important given that most relevant research focuses on the US market, which follows
a rules-based corporate governance approach. Our study thus contributes to the debate about
the two different governance approaches adopted by many countries worldwide (Nakpodia
et al., 2018; Sama and Shoaf, 2005). Although we document a consistent result with prior
studies in the US market (Brochet et al., 2021), we further show that CEO tenure
significantly influences both accounting-based and market-based performance, not just firm
value, as evidenced by Brochet et al. (2021). We also extend their study to investigate how
the CEO tenure–firm performance relationship varies across different levels of product
market competition, audit quality, firm age and life cycle. The positive relationship between
CEO tenure and firm performance suggests CEOs can learn more knowledge and skills over
PAR time, making value-enhancing strategic decisions. Our results further reveal a curvilinear
relationship (inverted U-shaped curve) between CEO tenure and firm performance, implying
that CEO tenure can improve firm performance up to a certain point and then become
detrimental. Hence, our findings can shed light on CEO research and corporate finance
practices in countries with institutional backgrounds and similar corporate governance
practices in New Zealand.
Our findings suggest that CEO tenure positively impacts firm performance, but this effect
narrows over time. Specifically, our results indicate that extended tenure can benefits such as
accumulated knowledge, strategic consistency and firm-specific expertise. However,
prolonged tenure may also introduce challenges, including the risk of entrenchment and
reduced adaptability. Given New Zealand’s principles-based corporate governance system,
we recommend that boards of directors and policymakers implement periodic performance
evaluation and strategic alignment reviews to ensure that long-tenured CEOs continue to
drive value. In addition, firms could establish structured succession planning and leadership
development initiatives to balance stability and innovation. While the ideal tenure length
may vary across firms and industries, our findings offer valuable insights for refining CEO
tenure policies in public-listed firms.
The remainder of this paper is organized as follows. We review relevant literature and
propose relevant hypotheses in Section 2. Section 3 discusses the research design and model
specification. We present and discuss the main results in Section 4. Finally, Section 5
concludes our study with limitations and areas for future research.

2. Literature review and hypothesis development

Agency theory (Jensen and Meckling, 1976) posits that the relationship between principals
(shareholders) and agents (managers) is characterized by an inherent conflict of interest
stemming from the delegation of decision-making authority by principals to agents. With this
framework, CEO tenure emerges as a critical determinant of firm performance, as it directly
influences the alignment of managerial actions with shareholder interest. As CEOs navigate the
complexities of corporate decision-making, their tenure becomes intertwined with the
evolution of the firm’s strategic decision and operational resilience. Prolonged CEO tenure
offers opportunities for the establishment of enduring relationships with stakeholders, fostering
trust and confidence in the leadership’s ability to steer the organization towards sustainable
growth. Conversely, extended CEO tenure may also harbour risks, such as managerial
complacency and resistance to change, which can impede innovation and responsiveness to
dynamic market conditions. Thus, CEOs, occupying the apex of the organizational hierarchy,
wield substantial discretion in shaping strategic decisions and operational policies.
Consequently, the duration of CEO tenure reflects the extent of managerial entrenchment and
agency costs and serves as a proxy for managerial experience and expertise.
Research on CEO tenure has yielded diverse findings across regions and firm sizes. For
large US firms, Bushman et al. (2010) report an average CEO tenure of approximately
10 years for turnover firms within the S&P 1000, while Coates and Kraakman (2010) find a
shorter average tenure of seven years for CEOs in Fortune 500 firms. These differences
suggest that CEOs in smaller firms may enjoy longer tenures. In New Zealand, studies
provide a more focused analysis of CEO tenure and its implications. Prevost et al. (2002)
report that CEO tenure ranged from 5.65 to 6.5 years over firm-year observations from 1991
to 1995. More recent research by Li and Roberts (2018) find an average CEO tenure of
6.3 years, with no significant relationship between CEO tenure and compensation.
Conversely, Lont et al. (2020) document a positive association between CEO tenure and
CEO compensation, while Sun and Cahan (2012) report a negative relationship between
CEO tenure and the quality of the compensation committee. Burns et al. (2023), analyzing Pacific
data from 2004 to 2016, estimate an average CEO tenure of 6 years, aligning with earlier Accounting
findings. For a deeper exploration of CEO tenure and related board tenure research, we refer Review
readers to Burns et al. (2023) and Sun and Bhuiyan (2020). These studies provide further
insights into the dynamics of tenure and governance.
Abdullah et al. (2025) and Abdullah and Tursoy (2021) investigate the relationships between
financial variables and firm value/performance. Abdullah et al. (2025) focus on the impact of
dividend policy on firm value in Turkey’s financial sector, finding a positive relationship that
strengthened after IFRS adoption and the abolishment of the mandatory dividend payment
policy in 2009. Similarly, Abdullah and Tursoy (2021) examine the link between firm
performance and capital structure for German non-financial firms, finding a positive relationship
driven by the benefits of debt financing, with IFRS adoption improving firm performance but
weakening the connection between capital structure and performance. Both studies highlight the
importance of external factors such as IFRS adoption and policy changes in influencing firm
value and performance. However, neither considers the role of CEO characteristics or tenure in
moderating these relationships, thus we extend and contribute to the existing literature.

2.1 CEO tenure

CEO tenure refers to “the time a person spends in the CEO position” in a given organization
(Darouichi et al., 2021, p. 661). CEO tenure is considered a central characteristic that can
predict both the behaviours and givens of the CEOs (Hambrick and Mason, 1984), which in
turn influences firms’ performance as CEOs make the most critical strategic decisions in
firms. Given the importance and observability of CEO tenure, there has been a considerable
amount of research on this CEO characteristic from different disciplines, from accounting or
finance to management, which is mainly built upon the agency and upper-echelon theories
(Hambrick and Gregory, 1991; Hambrick and Mason, 1984; Jensen and Meckling, 1976).
Reviewing relevant literature, Darouichi et al. (2021) outline five critical themes in CEO
tenure research: (1) CEO tenure and motivations focusing on CEO incentives and short-
termism, (2) CEO tenure and power focusing on CEO discretion and entrenchment, (3) CEO
tenure and social capital focusing on CEO ties with internal and external stakeholders, (4)
CEO tenure and human capital focusing on CEO abilities and contingencies, and finally (5)
CEO tenure and stakeholder perception focusing on the fit of the CEO from different
stakeholder perspectives. Extant studies also examine the impact of CEO tenure on various
firm outcomes, both financial and non-financial outcomes (Ali and Zhang, 2015; Brochet
et al., 2021; Chen et al., 2019). However, empirical evidence is inconclusive (Cao et al.,
2021; Darouichi et al., 2021). The following section will review relevant research on the
relationship between CEO tenure and firm performance, from which we propose two main
hypotheses to be tested in this paper.

2.2 CEO tenure and firm performance

According to the agency theory, the potential conflict of interest between the CEO and
shareholders can lead to opportunistic behaviours from the CEO, especially when shareholders
are unable to monitor the CEO due to information asymmetric problems effectively (Cao et al.,
2021; Jensen and Meckling, 1976). As tenure enhances, CEOs tend to develop long-term
relationships with shareholders, which reduces the conflicts of interest between the two parties
(Eisenhardt, 1989). Moreover, over time, shareholders know more about the CEOs’ behaviour
and thus can monitor them effectively (Eisenhardt, 1989). Long-tenured CEOs are also claimed to
accumulate more relevant knowledge and skills, leading to more effective strategic decisions and
enhanced firm performance (Darouichi et al., 2021; Graf-Vlachy et al., 2020; Li and Patel, 2019).
PAR Long-tenured CEOs are more experienced in handling strategic risks (Simsek, 2007). Li
and Patel (2019) show that longer tenure helps CEOs enhance domain-specific learning
and knowledge about the organization. Similarly, Graf-Vlachy et al. (2020) find that
CEOs’ cognitive complexity increases significantly as their tenure advances, and they
gain more role-specific knowledge over time.
Resource dependence theory (RDT) and dynamic capabilities theory enhance the analysis
of CEO tenure and firm performance. RDT suggests that organizations depend on external
resources and relationships for growth (Pfeffer and Salancik, 2015). Having built valuable
external connections, long-tenured CEOs can secure resources like financing and strategic
partnerships, improving firm performance. Dynamic capabilities theory highlights how
CEOs, through accumulated experience, develop the ability to adapt strategies, drive
innovation and respond to market changes, fostering sustained competitive advantage (Teece
et al., 1997). Together, these theories illustrate how long-tenured CEOs leverage internal
knowledge and external relationships to enhance firm performance.
Empirical research further evidence that CEO tenure is associated with trust and
credibility among investors, leading to higher stock prices and increased market
capitalization. CEOs are pivotal in shaping organizational culture, fostering alignment with
strategic goals and enhancing employee engagement. In addition, strategic relationships and
partnerships established by long-tenured CEOs often result in synergies and market
positioning. Furthermore, CEOs with longer tenure are likely to be committed to innovation,
which drives continuous improvement and the firm’s competitive advantage. Consequently,
we posit that CEO tenure can improve firm performance:

H1. CEO tenure is positively associated with firm performance.

However, an alternative perspective suggests that CEO tenure can exacerbate the
misalignment of interest between CEOs and shareholders. As CEOs spend more time in the
office, their motivations and priorities may evolve, potentially diverging from the firm’s
overarching goals. Empirical research evidence that longer-tenured CEOs tend to allocate
resources to serve their interests as they perceive that the benefits they receive from the firm
are limited by their tenures (Barker and Mueller, 2002; Cassell et al., 2013; Darouichi et al.,
2021). For example, Barker and Mueller (2002) show that over time, rather than align with
the firm’s goals, CEOs tend to shift the R&D spending towards their personal preferences,
worsening the agency problems. Research also shows that tenure increases CEO power
(DeBoskey et al., 2019; Muttakin et al., 2018). Over time, the CEO can gain more
negotiating power (Hermalin and Weisbach, 1998) and is more likely to resist shareholder
requests, thus creating more conflicts of interest and adversely affecting firm performance
(Cao et al., 2021; Hambrick and Gregory, 1991; Miller, 1991).
Compromising these two competing views, Hambrick and Gregory (1991) in their seminal
work on CEO tenure, which is based on the upper echelons theory (Hambrick and Mason,
1984), argue for a dynamic model of CEO tenure. More specifically, they propose five seasons
during the CEOs time at the office: (1) response to the mandate, (2) experimentation, (3)
selection of an enduring theme, (4) convergence, and finally (5) dysfunction. More specifically,
CEOs tend to be highly interested in the task despite having low (but rapidly increasing) task-
specific knowledge and skills at the early stage of their job. Their power is relatively low in this
period as well. However, Hambrick and Mason (1984) argue over time that while the task
knowledge is high and CEO power is very high, the CEOs task interest becomes low and
diminishing. As a result of these dynamic phases in the CEO tenure, the relationship between
CEO tenure and firm performance is not likely to be straightforward and linear.
 Recent literature reviews show evidence of the curvilinear impact of CEO tenure on firm Pacific
performance. It should be noted that a majority of such research is US-based. For example, Accounting
Brochet et al. (2021) examined S&P 1500 companies (1992–2017) and documented an inverted Review
U-shaped curve between CEO tenure and firm value measured by Total Q. Their results imply
that CEO tenure initially improves firm value as consistent with our argument regarding the
accumulated knowledge and interest that the CEO has at the early stage of their tenure.
However, as tenure advances, the CEO may lose that engagement and motivation and gain
much more power, worsening the agency conflicts of interest with the shareholders. As a result,
up to a certain point, CEO tenure then will adversely affect firm value. In another study, Huang
and Hilary (2018) also find an inverted U-shaped relationship between board tenure and firm
performance for US firms. The intuition is also similar, that is, directors can learn more about
the company and related things over time, supporting their strategic decision-making and thus
enhancing firm value. However, up to a certain point when CEO tenure leads to more power and
entrenchment that overweigh the benefits mentioned above, long CEO tenure becomes
detrimental to firm value. Following that, we also hypothesize in our paper that:

H2. A curvilinear (inverted U-shaped) relationship exists between CEO tenure and firm
performance.

3. Data and method

3.1 Data
Our sample comprises publicly listed companies on the NZX. We obtained financial
accounting data from Thomson Reuters Eikon and manually collected corporate governance
information spanning the period from 2000 to 2020. The selection of 2000 as the initial year
is based on the limited availability of annual reports in the NZX Research Centre before this
date ([Link] To ensure data consistency, we concluded our
sample in 2020. This decision aligns with the fact that, during our data collection period, the
most recent annual reports were accessible up to 2020. Furthermore, we justify this endpoint
in light of the economic uncertainties introduced by the COVID-19 pandemic, which
potentially impacted stock market volatility and, consequently, firm valuation. Limiting the
study to 2020 helps mitigate macroeconomic biases in our research. Our initial sample
encompassed 1687 firm-year observations with non-missing CEO tenure data from 2000 to
2020, consisting of 114 firms. Subsequently, we excluded 142 firm-year observations related
to regulated industries. In addition, during the manual data collection process, we
encountered challenges that resulted in the loss of 23 firm-year observations due to
unavailable annual reports and undisclosed information regarding CEO tenure, age, and
gender. Finally, our study sample consists of 1,522 firm-year observations across 109 firms.
To ensure data quality, we used winsorization to address outliers, setting the boundaries at
the 1st and 99th percentiles. Table 1 reports the sample selection process.

3.2 Model specification and variable measurement

We use the following basic regression specification for the firm i and period t to examine our
developed H1 and H2:
TOBINSQt = ∅0 + ∅1 CEO_TENUREt + ∅2 CEO_AGEt + ∅3 CEO_GENDERt
+ ∅4 CEO_FOUNDERt + ∅5 CEO_DUALt + ∅6 SIZEt + ∅7 LEVt (1)
+ ∅8 LOSSt + YearFE + IndustryFE + εt
PAR Table 1. Sample selection

Firm-year observation with non-missing CEO tenure data from 2000 to 2020 1,687

Less: regulated industries (142)

Less: missing variables (23)
Final sample 1,522

Source(s): Authors’ calculation

TOBINSQt = ∂0 + ∂1 CEO_TENUREt2 + ∂2 CEO_TENUREt + ∂3 CEO_AGEt

+ ∂4 CEO_GENDERt + ∂5 CEO_FOUNDERt + ∂6 CEO_DUALt (2)
+ ∂7 SIZEt + ∂8 LEVt + ∂9 LOSSt + YearFE + IndustryFE + εt

where TOBINSQ is the proxy for firm performance measures, it is the sum of the market
value of equity plus the book value of total debt scaled by total assets. Our primary variable
of interest in H1 is CEO tenure measured in the coefficient ∅1CEO_TENUREt. We use two
measures for CEO tenure, CEO_TENURE and Ln(CEO_TENUE). CEO_TENURE is
measured as the number of years the CEO has been serving as the firm CEO. Ln
(CEO_TENURE) is measured as the natural logarithm of CEO tenure years. A positive
coefficient on CEO_TENURE signifies that higher CEO tenure is associated with an increase
in firm performance, while a negative coefficient indicates the opposite, suggesting that
longer CEO tenure leads to a decrease in firm performance. In H2, our primary variable of
interest is ∂1 CEO_TENUREt2 . Predicting a non-linear relationship between CEO_TENUE
and firm performance, we include the square term of CEO_TENURE, measured as
∂1 CEO_TENUREt2 in the regression model, equation (2).
Consistent with the existing corporate governance literature, we include several control
variables. CEO_AGE is measured as the firm CEO age in years. CEO_GENDER is a dummy
variable assigned a value of 1 if the CEO is female, 0 otherwise. CEO_FOUNDER is a
dummy variable equal to 1 if the CEO is a founder CEO, 0 otherwise. Also, CEO_DUAL is a
dummy variable equal to 1 if the CEO is also the Chairman of the board and 0 otherwise.
SIZE is the proxy for firm size measure as the natural logarithm of firm total assets. Leverage
(LEV) is estimated as the ratio of firm debt scaled by total assets. Loss (LOSS) is an indicator
variable that equals 1 if the firm reported loss and 0 otherwise to measure the profitability. We
also control firm and year fixed effect. All variable definitions/measurements are available in
Appendix.

4. Empirical results
4.1 Descriptive statistics
Table 2 Panel A reports the sample characteristics. Over the 2000–2020 period, the mean
(standard deviation) Tobin’s Q value is 1.84 (2.09) and the mean (standard deviation) CEO
tenure value is 5.80 (5.62). Also, the median of CEO tenure is four years, suggesting that half
of the CEOs in the sample period serve four years or less, meaning shorter tenures of CEOs
are more common in New Zealand. Therefore, a long-tenure in this context might be
considered above 4 years of CEO tenure. Compared with Brochet et al. (2021) US CEO
sample, CEOs in New Zealand have several different characteristics. First, they tend to have
a shorter tenure on average (5.8 years) compared to Brochet et al. (2021) sample firms
(7.3 years). CEOs in our sample have an average age of 50.83, relatively lower than those in
Table 2. Summary statistics Pacific
Accounting
Variable(s) Mean Median SD P25 P75
Review
Panel A: Descriptive statistics
TOBINSQ 1.8436 1.1740 2.0993 0.9123 1.8919
CEO_TENURE 5.8004 4.0000 5.6217 1.6561 8.0192
Ln(CEO_TENURE) 1.1852 1.3893 1.2552 0.5045 2.0818
CEO_AGE 50.8303 51.0000 7.5475 46.0000 56.0000
CEO_GENDER 0.0492 0.0000 0.2163 0.0000 0.0000
CEO_FOUNDER 0.1115 0.0000 0.3149 0.0000 0.0000
CEO_DUAL 0.1300 0.0000 0.3364 0.0000 0.0000
SIZE 19.0117 13.2162 2.2524 17.6591 20.5866
LEV 0.2309 0.2121 0.1988 0.0425 0.3433
LOSS 0.1113 0.1000 0.1859 0.0000 1.000
Panel B: Correlation matrix
Variables(s) (1) (2) (3) (4) (5) (6) (7) (8) (9)
[1] TOBINSQ 1
[2] CEO_TENURE 0.08*** 1
[3] CEO_AGE 0.05** 0.28*** 1
[4] CEO_GENDER −0.06** 0.08*** −0.04* 1
[5] CEO_FOUNDER 0.08*** 0.34*** 0.08*** 0.22*** 1
[6] CEO_DUAL −0.03 0.06*** 0.10*** 0.03 0.15*** 1
[7] SIZE −0.36*** −0.03 0.04* −0.03 −0.17*** −0.00 1
[8] LEV −0.18*** −0.02 −0.03 −0.10*** −0.01 0.04 0.21*** 1
[9] LOSS −0.03 −0.04* 0.01 −0.03 −0.02 −0.01 −0.11*** 0.17*** 1

Note(s): Panel (A) All variable definitions are in Appendix; Panel (B) All variable definitions are in
Appendix. ***, ** and * represent statistical significance at the 1, 5 and 10% levels, respectively (two-
tailed tests)
Source(s): Authors’ calculation

Brochet et al. (2021) sample firms (55.56). We also observe that the New Zealand sample
firms have a slightly higher ratio of female CEOs (mean value of 0.05 vs 0.03 in Brochet
et al.’s sample) and a significantly lower ratio of CEO duality (mean value of 0.13 vs 0.55 in
Brochet et al.’s sample) compared to those in the USA. However, there is a comparable
percentage of CEO founders in both studies.

4.2 Correlation analysis

Table 2 Panel B reports the correlation matrix among the variables used in our research model.
In line with our research hypothesis, we have observed a statistically significant and positive
correlation between CEO tenure (CEO_TENURE) and firm value, as measured by Tobin’s Q
(TOBINSQ). Our findings are statistically significant at a 1 % level. This finding suggests that
longer CEO tenures are associated with an increase in firm value. Furthermore, our analysis
consistently reveals a positive correlation between CEO age (CEO_AGE) and Tobin’s Q,
indicating that as CEO age increases, there is a positive influence on firm value. Furthermore,
our analysis reveals noteworthy associations between CEO tenure (CEO_TENURE) and
several key variables, including CEO age (CEO_AGE), CEO gender (CEO_GENDER),
CEO founder status (CEO_FOUNDER) and CEO duality (CEO_DUAL). These
findings suggest that firms with older CEOs, female CEOs, founder CEOs and CEOs
holding duality positions tend to have longer CEO tenures. Our findings show that firm
performance (TOBINSQ) tends to decrease as firm size (SIZE) and firm leverage (LEV)
PAR increase. In other words, larger and more highly leveraged firms generally have lower
firm performance. In addition, we find a positive relationship between firm size (SIZE)
and firm leverage (LEV), indicating that larger firms are more likely to use debt
financing. Importantly, these relationships are statistically significant at the 1% level,
underscoring their robustness. This finding implies that higher CEO tenures are
associated with improved firm performance, reflecting the impact of CEO experience
and leadership on the firm financial success.

4.3 Baseline regression results

Table 3 reports the findings of OLS regression. Model 1 reports the findings of H1, in which
we examine the association between CEO tenure and firm performance. The coefficient
(0.0194**, t = 2.03) for CEO_TENURE is positive and statistically significant at the 5%
level. Our results suggest that this positive coefficient signifies a meaningful association
between CEO tenure and firm performance, confirming our H1. In terms of economic
significance measured as [(∅1CEO_TENURE * δCEO_TENURE)/δTOBINSQ] is
considered to test the importance of CEO_TENURE. In terms of the economic significance
of the CEO_TENURE is [(0.0194 * 5.6217)/2.0993] = 0.0520, which can be interpreted as a
1% increase in the CEO_TENUE leads to about 5.20% increase in firm performance which
implies meaningful effect. To provide economic context regarding the firm total assets,
5.20% of the improvement of firm performance is equivalent to a total of (mean of SIZE
$180,582,807 * 0.0520) = $9,390,306 of total assets.
Model 2 reports the findings of H2, and our variable of interest is ∂1 CEO_TENUREt2 ,
squared term of CEO_TENURE. We find the coefficient for CEO_TENUREt2 is negative
(−0.0028***, t = −5.22) and significant at a 1% level, supporting our H2 of a non-linear
(inverted U-shaped) relationship between CEO tenure and firm value. Directors can enhance

Table 3. CEO tenure and firm performance – baseline results

DEP = TOBINSQ
Model 1 Model 2 Model 3
Variable(s) Coefficient (t-value) Coefficient (t-value) Coefficient (t-value)

CEO_TENURE 0.0194** (2.03) 0.0411*** (5.92)

CEO_TENURE2 −0.0028*** (−5.22)
Ln(CEO_TENURE) 0.1211*** (3.31)
CEO_AGE 0.3781 (0.72) 0.4143 (0.72) 0.4021 (0.55)
CEO_GENDER −0.8504*** (−4.12) −0.8854*** (−5.01) −0.8674*** (−4.22)
CEO_FOUNDER 0.1211 (0.62) 0.1193 (0.87) 0.1345 (0.63)
CEO_DUAL −0.1231 (−0.92) −0.1196 (−0.97) −0.1310 (−0.89)
SIZE −0.2532*** (−8.92) −0.2124*** (−6.12) −0.2175*** (−8.22)
LEV −0.2598*** (−4.17) −0.2723*** (−3.96) −0.2872*** (−3.92)
LOSS −0.0034 (−1.21) −0.0039 (−1.09) −0.0032 (−1.13)
Constant 4.9324*** (3.11) 4.1232*** (2.88) 3.9234*** (3.11)
YEAR_FE Yes Yes Yes
INDUSTRY_FE Yes Yes Yes
Adj R2 0.1912 0.2011 0.1988
N 1,522 1,522 1,522

Note(s): Table 3 reports the regression results testing the relationship between CEO tenure and firm
performance. All variable definitions are in Appendix. ***, ** and * represent statistical significance at the
1, 5 and 10% levels, respectively (two-tailed tests)
Source(s): Authors’ calculation
firm value through their accumulated knowledge and skills in their early tenure. However, up Pacific
to a certain point when long tenure can lead to more power and entrenchment that overweigh Accounting
the aforementioned benefits, long CEO tenure becomes detrimental to firm value. Our Review
findings indicate that the square term of CEO_TENURE has significantly decremental
explanatory power for the variation of firm performance. Noteworthy to mention that the
coefficient for CEO_TENURE (∂2CEO_TENUREt) is positive and statistically significant at
a 1% level.
Model 3 examines the alternative measures for CEO tenure, Ln(CEO_TENURE). Our
findings consistently show that the coefficient of Ln(CEO_TENURE) is positive
[0.1211***, t = 3.31] and statistically significant at a 1% level. Regarding the control
variables, the negative coefficient on female CEOs (CEO_GENDER) suggests that firms led
by female CEOs tend to exhibit lower firm performance. This finding may reflect underlying
structural or industry-specific factors rather than inherent differences in leadership
effectiveness. In addition, we observe that larger firms (SIZE) and firms with higher leverage
(LEV) are associated with lower firm performance, possibly due to increased complexity,
bureaucratic inefficiencies, or financial constraints arising from higher debt burdens. Finally,
the adjusted R2 varies between 19.12 and 20.11, reflecting our regression model’s goodness
of fit.

4.4 Additional analysis

We have also performed several additional tests. As we use a market-based performance
measure (Tobin’s Q) in our baseline models, we use two alternative accounting-based
measures of firm performance: ROA and BEP (Papangkorn et al., 2021) and conduct the
analysis. Table 4 shows the results for ROA which are consistent with our baseline results.

Table 4. CEO tenure and firm performance – additional analysis

DEP = ROA
Model 1 Model 2 Model 3
Variable(s) Coefficient (t-value) Coefficient (t-value) Coefficient (t-value)

CEO_TENURE 0.0216*** (4.92) 0.0105*** (6.98)

CEO_TENURE2 −0.0038*** (−4.22)
Ln(CEO_TENURE) 0.0039*** (2.86)
CEO_AGE 0.1765*** (4.28) 0.1813*** (4.23) 0.1974*** (2.87)
CEO_GENDER −0.0092 (−0.71) −0.0087 (−0.76) −0.0086*** (−3.23)
CEO_FOUNDER 0.0272*** (2.71) 0.0319*** (3.09) 0.0587*** (2.99)
CEO_DUAL −0.0357*** (−3.25) −0.0407*** (−3.12) −0.0511*** (−2.72)
SIZE −0.0132*** (−4.11) −0.0221*** (−4.99) −0.0399*** (−6.11)
LEV −0.2309*** (−5.11) −0.2763*** (−8.33) −0.2677*** (−6.11)
LOSS −0.0039 (−1.09) −0.0021 (−0.97) −0.0014 (−0.54)
Constant 1.1976* (1.79) 1.4423* (1.79) 1.3301* (1.86)
YEAR_FE Yes Yes Yes
INDUSTRY_FE Yes Yes Yes
Adj R2 0.6011 0.6321 0.6511
N 1,522 1,522 1,522

Note(s): Table 4 reports the regression results testing the relationship between CEO tenure and firm
performance using the alternative proxy for firm performance ROA. All variable definitions are in
Appendix. ***, ** and * represent statistical significance at the 1, 5 and 10% levels, respectively (two-tailed
tests)
Source(s): Authors’ calculation
PAR Particularly, the coefficient for CEO_TENURE (0.0216***, t = 4.92) is positive and
statistically significant at a 1% level (Table 4, Model 1). The coefficient (−0.0038***,
t = −4.22) for CEO_TENUREt2 is also negative and statistically significant at a 1% level
(Table 4, Model 2). Furthermore, when we use a logarithmic value of CEO_TENURE, we
still observe a similar result of a significantly positive relationship between CEO_TENURE
and ROA (0.0039***, t = 2.86). The relationships between control variables and firm
performance are also consistent with those in our baseline models.
Table 5 shows the results for the basic earnings power (BEP) computed as the ratio of
earnings before interest and tax (EBIT) to total assets reported in a given financial year. Our
results still hold. The coefficient (0.0014***, t = 3.49) for CEO_TENURE is positive and
statistically significant at a 1% level (Table 5, Model 1). The coefficient (−0.0020***,
t = −3.31) for CEO_TENUREt2 is also negative and statistically significant at a 1% level
(Table 5, Model 2). Model 3 also shows a consistent result of a significantly positive
relationship between Ln(CEO_TENURE) and BEP (0.0032***, t = 3.11).

4.5 Cross-sectional analysis

4.5.1 The role of product market competition. Empirical research evidence that product
market competition can significantly affect firm value (Chang and Jo, 2019; Sheikh, 2018).
In highly competitive markets, firms face pressure to innovate and differentiate their
products to maintain market share, positively impacting firm value through enhanced
revenue and profitability. However, this competition can lead to lower profit margins and
increased operating costs. Conversely, in less competitive markets with high barriers to entry,
firms may enjoy greater pricing power and higher profit margins, positively affecting firm
value. Yet, reduced competition may foster complacency, diminishing incentives for
innovation and efficiency improvement and potentially limiting long-term value creation.
Therefore, we examine whether our findings remain consistent across high and low-
competition markets. Following prior studies, we measure firm competitiveness using the
Lerner Index (Babar and Habib, 2022; Lerner, 1934). We also use the Herfindahl-Hirschman
index (HHI) as an alternative measure (Jiang et al., 2015). We report the findings in Table 6
Panel A.
We find a significant positive association between CEO tenure and firm value in highly
competitive markets characterised by intense rivalry and rapid innovation. Our findings
suggest that CEOs with longer tenures are better positioned to navigate competitive
pressures, develop effective strategies, and capitalize on market opportunities, ultimately
driving firm value. However, in less competitive markets where barriers to entry are higher,
and competition is less intense, the relationship between CEO tenure and firm value may be
less pronounced and statistically insignificant. Interestingly, our analysis reveals a negative
association between the CEO_TENURE2 and firm value across varying degrees of market
competition. This suggests that while initial increases in CEO tenure may positively impact
firm value in competitive markets, there may be diminishing returns or adverse effects on
value creation as CEO tenure continues to increase. These findings highlight the nuanced
interplay between CEO tenure, market competition, and firm value, emphasizing the
importance of considering competitive dynamics when evaluating the impact of CEO tenure
on organizational performance.
4.5.2 The role of audit quality. Our baseline models show that long-tenured CEOs
enhance firm performance. However, we also find a significant inverted U-shaped
relationship between CEO tenure and firm performance, suggesting that such a positive
impact can hold up to a certain threshold; after that, long CEO tenure can hinder firm
performance. This could be because of the conflicts of interests between CEOs and
Table 5. CEO tenure and firm performance – additional analysis Pacific
Accounting
DEP = BEP
Model 1 Model 2 Model 3 Review
Variable(s) Coefficient (t-value) Coefficient (t-value) Coefficient (t-value)

CEO_TENURE 0.0014*** (3.49) 0.0054*** (5.25)

CEO_TENURE2 −0.0020*** (−3.31)
Ln(CEO_TENURE) 0.0032*** (3.11)
CEO_AGE 0.0899*** (2.99) 0.1188*** (3.11) 0.1288*** (3.69)
CEO_GENDER −0.0111 (−1.22) −0.0146* (−1.72) −0.0152*** (−4.22)
CEO_FOUNDER 0.0196** (2.76) 0.0214*** (2.88) 0.0254*** (2.94)
CEO_DUAL −0.0233*** (−3.77) −0.0267*** (−3.98) −0.0700*** (−3.68)
SIZE −0.0111*** (−6.11) −0.0088*** (−5.22) −0.0018*** (−4.97)
LEV −0.1233*** (−8.11) −0.1574*** (−8.99) −0.1955*** (−6.42)
LOSS −0.0034 (−0.84) −0.0011 (−0.44) −0.0010 (−0.37)
Constant −0.0813 (−1.23) −0.2345 (−0.37) −0.0975 (−0.63)
YEAR_FE Yes Yes Yes
INDUSTRY_FE Yes Yes Yes
Adj R2 0.6755 0.6988 0.6975
N 1,522 1,522 1,522

Note(s): Table 5 reports the regression results of testing the relationship between CEO tenure and firm
performance using the alternative proxy for firm performance BEP. All variable definitions are in Appendix.
***, ** and * represent statistical significance at the 1, 5 and 10% levels, respectively (two-tailed tests)
Source(s): Authors’ calculation

shareholders, that is, longer-tenured CEOs can perceive that the benefits they receive from
the firm are limited by their tenures, so they tend to allocate resources to serve their interests
(Barker and Mueller, 2002; Cassell et al., 2013; Darouichi et al., 2021). Research has shown
that audit quality helps alleviate agency problems and increase firm value (Francis, 2004;
Khan et al., 2016). For example, audit quality is found to be associated with improved
earning quality (Francis, 2004). Similarly, there has been evidence showing that firms with
top auditors have lower cost of equity capital than their counterparts (Chen et al., 2011;
Khurana and Raman, 2004). Following that, firms with high audit quality tend to have lower
agency problems and a better information environment, thus strengthening the positive
impact of CEO tenure on firm value. To investigate if the CEO tenure-firm value relationship
is affected by audit quality, we divide our sample into two subsamples: (1) firms that are
audited by Big4 firms (high audit quality) and (2) firms that are not and conduct our analysis.
Results (Table 6, Panel B) show consistent findings with those in our baseline models in our
Big4 subsample, suggesting that audit quality reinforces the positive impact of CEO tenure
on firm value (TOBINSQ). On the other hand, we find no significant relationships between
CEO tenure and firm value in the non-Big4 subsample.
4.5.3 The role of firm age. Older firms may have accumulated more resources, including
financial capital, intellectual property and human capital. These resources can give older
firms a competitive advantage and increase firm value (Bank and Insam, 2021; Chay et al.,
2015). Conversely, younger firms may face resource access challenges, impacting their
growth prospects and firm value. Therefore, the association between CEO tenure and firm
value is likely moderated by firm age, as older and younger firms exhibit distinct dynamics in
their relationship with CEO tenure. A long-tenured CEO can provide stability, experience,
and industry knowledge in younger firms, enhancing firm value by driving innovation,
 PAR
Table 6. Cross-sectional determinants of CEO tenure and firm performance

DEP = TOBINSQ
High competition Low competition
Model 1 Model 2 Model 3 Model 1 Model 2 Model 3
Coefficient Coefficient Coefficient Coefficient Coefficient Coefficient
Variable(s) (t-value) (t-value) (t-value) (t-value) (t-value) (t-value)

Panel A – product market competition

CEO_TENURE 0.0344** (2.32) 0.1265** (3.63) −0.0068 (−0.89) −0.0245 (−1.33)
CEO_TENURE2 −0.0047*** (−3.23) 0.0010 (0.93)
Ln(CEO_TENURE) 0.1598*** (2.67) −0.0155 (−0.49)
Controls CEO_AGE, CEO_GENDER, CEO_FOUNDER, CEO_DUAL, SIZE, LEV and LOSS
Constant 4.6543** (2.31) 5.7123** (2.19) 4.9876** (2.29) −0.2545 (−0.77) −0.1976 (−0.09) −0.0045 (−0.04)
YEAR_FE Yes Yes Yes Yes Yes Yes
INDUSTRY_FE Yes Yes Yes Yes Yes Yes
Adj R2 0.2578 0.2602 0.2770 0.4986 0.4501 0.4576
N 579 579 579 611 611 611
Panel B – audit quality
Variable(s) DEP = TOBINSQ
Big4 = 1 Big4 = 0
CEO_TENURE 0.0188* (1.92) 0.0591*** (2.79) 0.0171 (1.29) 0.0512 (1.26)
CEO_TENURE2 −0.0022** (−2.44) −0.0016 (−1.16)
Ln(CEO_TENURE) 0.1003*** (2.67) 0.0599 (0.96)
Controls CEO_AGE, CEO_GENDER, CEO_FOUNDER, CEO_DUAL, SIZE, LEV and LOSS
Constant 5.1012** (2.54) 4.9091** (2.34 5.1004** (2.48) 5.1123 (1.19) 5.1125 (1.19) 5.2111 (1.14)
YEAR_FE Yes Yes Yes Yes Yes Yes
INDUSTRY_FE Yes Yes Yes Yes Yes Yes
Adj R2 0.1759 0.1801 0.1671 0.3210 0.3201 0.3109
N 1106 1106 1106 362 362 362
(continued)
Table 6. Continued

DEP = TOBINSQ
High competition Low competition
Model 1 Model 2 Model 3 Model 1 Model 2 Model 3
Coefficient Coefficient Coefficient Coefficient Coefficient Coefficient
Variable(s) (t-value) (t-value) (t-value) (t-value) (t-value) (t-value)

Panel C – firm age

Variable(s) DEP= TOBINSQ
New firm Old firm
CEO_TENURE 0.0399*** (3.27) 0.1264*** (4.19) −0.0076 (−0.69) 0.0401 (1.32)
CEO_TENURE2 −0.0047*** (−3.27) −0.0026* (−1.71)
Ln(CEO_TENURE) 0.2081*** (3.98) −0.0011 (−0.01)
Controls CEO_AGE, CEO_GENDER, CEO_FOUNDER, CEO_DUAL, SIZE, LEV and LOSS
Constant 9.4910*** (3.35) 9.0588*** (3.21) 9.02410*** (3.36) 1.3999 (0.59) 1.0762 (0.32) 1.8422 (0.69)
YEAR_FE Yes Yes Yes Yes Yes Yes
INDUSTRY_FE Yes 911 Yes Yes Yes Yes
Adj R2 0.1811 0.1896 0.1888 0.1792 0.1812 0.1810
N 782 782 765 700 700 700
Panel D – life cycle
Variable(s) DEP = TOBINSQ
MATURE = 0 MATURE = 1
CEO_TENURE 0.0239** (2.17) 0.1119*** (4.42) 0.0390 (1.42) −0.0329 (−0.62)
CEO_TENURE2 −0.0036*** (−3.62) −0.0048 (−1.24)
Ln(CEO_TENURE) 0.1411*** (2.70) 0.0988 (0.89)
(continued)
Review
Pacific
Accounting
 PAR

Table 6. Continued

DEP = TOBINSQ
High competition Low competition
Model 1 Model 2 Model 3 Model 1 Model 2 Model 3
Coefficient Coefficient Coefficient Coefficient Coefficient Coefficient
Variable(s) (t-value) (t-value) (t-value) (t-value) (t-value) (t-value)

Controls CEO_AGE, CEO_GENDER, CEO_FOUNDER, CEO_DUAL, SIZE, LEV and LOSS

Constant 5.1911* (1.76) 5.1121* (1.70) 5.5871* (1.72) 11.2415*** (2.92) 12.2450** (2.32) 10.1670** (2.11)
YEAR_FE Yes Yes Yes Yes Yes Yes
INDUSTRY_FE Yes Yes Yes Yes Yes Yes
Adj R2 0.2095 0.2214 0.2064 0.5095 0.5254 0.5301
N 765 765 765 108 108 108

Note(s): Panel A reports the regression results testing the relationship between CEO tenure and firm performance in the context of firm product market
competition. All variable definitions are in Appendix. ***, ** and * represent statistical significance at the 1, 5 and 10% levels, respectively (two-tailed tests);
Panel B reports the regression results of testing the relationship between CEO tenure and firm performance in the context of audit quality. All variable definitions
are in Appendix. ***, ** and * represent statistical significance at the 1, 5 and 10% levels, respectively (two-tailed tests); Panel C reports the regression results of
testing the relationship between CEO tenure and firm performance in the context of firm age. All variable definitions are in Appendix. ***, ** and * represent
statistical significance at the 1, 5 and 10% levels, respectively (two-tailed tests); Panel D reports the regression results of testing the relationship between CEO
tenure and firm performance in the context of the firm life cycle. All variable definitions are in Appendix. ***, ** and * represent statistical significance at the 1%,
5% and 10% levels, respectively (two-tailed tests)
Source(s): Authors’ calculation
strategic planning, and effective decision-making. Therefore, we categorize the sample into Pacific
two groups based on the firm age to examine our conjecture: new firm (lower than mean firm Accounting
age) and old firm (greater than mean firm age). Mean firm age of our sample is 17.43 years. Review
Our findings are reported in Table 6 Panel C.
Our study reveals a significant positive association between CEO tenure
(CEO_TENURE) and firm value (TOBINSQ) within the cohort of new firms, demonstrating
statistical significance at the 1% level. However, no statistically significant association was
observed within the group of older firms. Intriguingly, the relationship between CEO tenure
(CEO_TENURE2) and firm value exhibited a negative association for both new and old firm
cohorts, indicating a reduction in firm value for both categories when CEO tenure
(CEO_TENURE2) increases, thereby suggesting a non-linear relationship. Our findings
imply that as CEO tenure increases but beyond a certain point, the firm value starts to
decrease, indicating a non-linear relationship between CEO tenure and firm value. These
findings align with our preliminary results, thereby reinforcing the robustness of our
findings.
4.5.4 The role of life cycle. Every firm goes through different life cycles, which are
shown to have significant impacts on financial policies, corporate governance and financial
performance (Dickinson, 2011; Habib and Hasan, 2019; Houqe et al., 2023). For example,
Loderer et al. (2017) find that mature firms tend to invest less and hence experience a
decrease in firm value. However, these firms are also believed to possess more assets in place
and face less uncertainty in their operations than their immature counterparts, so they are
likely to perform better (Habib and Hasan, 2019). Firm life cycle also affects various
corporate governance issues such as board structure (Habib et al., 2018) and CEO
compensation (Kanagaretnam et al., 2009). Such evidence suggests that the impact of CEO
tenure on firm performance can be moderated by the firm life cycle. To test the moderation
role of the firm life cycle, we follow DeAngelo et al.’s (2006) approach to classify firms into
mature firms and firms that do not belong to the mature firm group (growth firm) and to re-
perform the analysis with the two subsamples. We report our findings in Table 6, Panel
D. Results reveal consistent findings for growth firms. Particularly, for growth firms, CEO
tenure enhances firm value. However, the positive impact holds up to a certain threshold and
then decreases over time (inverted U-shaped curve). Interestingly, this is not the case for
mature firms. We find no significant relationships in the mature subsample, suggesting that
CEO may not exhibit significant influence on mature firms given their unique characteristics
in this life cycle.

4.6 Robustness and endogeneity tests

Although our results are held after controlling for various CEO characteristics and firm-level
variables and with alternative measures, they can still be subject to potential endogeneity
problems. Particularly, unobservable firm-specific factors can affect firm performance while
also correlated with CEO tenure, leading to omitted variable biases. As we manually collect
the data, our sample may not be random and may be subject to sample selection biases. Thus,
we further use various tests to check the robustness of our findings and address the
endogenous problems. We regress firm performance (Tobin’s Q) on one-year lagged values
of CEO tenure and control variables to mitigate potential reverse causation. We consistently
find a significantly positive relationship between CEO_TENURE and firm performance
(0.0901***, t = 2.70) at a 1% level (Table 7, Model 1). We also include firm fixed effects to
further control for any unobserved firm-specific factors that do not usually change over time.
Our result of a positive link between CEO_TENURE and firm performance remains valid
(0.1067**, t = 2.11) (Table 7, Model 2). Following Hasan et al. (2020), we further conduct a
PAR Table 7. CEO tenure and firm performance – robustness tests

One year lagged effects Firm fixed effects Change analysis

Model 1 Model 2 Model 3
Variable(s) Coefficient (t-value) Coefficient (t-value) Coefficient (t-value)

CEO_TENURE 0.0901*** (2.71) 0.1067** (2.11) 0.0118** (2.41)

CEO_AGE 0.5491 (0.72) 0.3511 (0.62) 0.4012 (0.71)
CEO_GENDER −0.6199*** (−2.98) −0.8411** (−2.11) −0.1159 (−1.29)
CEO_FOUNDER 0.0410 (0.25) 0.0911 (0.48) −0.1125 (−0.59)
CEO_DUAL −0.0695 (−0.39) −0.1592 (−0.59) 0.0288 (0.17)
SIZE −0.2619*** (−7.11) −0.2568*** (−3.79) −0.0489 (−1.59)
LEV −0.5641*** (−3.11) −0.5891*** (−2.92) −0.2721 (−1.39)
LOSS −0.0035 (−0.24) −0.0031 (−0.27) −0.0011 (−0.01)
Constant 1.0678** (2.62) 1.2789*** (2.72) 0.9912*** (4.11)
YEAR_FE Yes Yes Yes
INDUSTRY_FE Yes Yes Yes
FIRM FE No Yes Yes
Adj R2 0.1951 0.2014 0.0912
N 1,420 1,522 1522

Note(s): Table 7 reports the regression results testing the relationship between CEO tenure and firm
performance using a change (and lag effect) analysis and firm fixed effect regression. All variable definitions
are in Appendix. ***, ** and * represent statistical significance at the 1,5 and 10% levels, respectively (two-
tailed tests)
Source(s): Authors’ calculation

change analysis to mitigate potential biases from time-invariant unobserved effects. The
intuition is that if CEO tenure influences firm performance, then a change in CEO tenure
should also significantly affect changes in firm performance. We regress annual changes in
firm performance on changes in CEO tenure and control variables and find a consistent
result. Particularly, the coefficient for changes in CEO_TENURE is positive (0.0118**, t =
2.41) and significant at a 5% level (Table 7, Model 3).
Following prior studies (Hasan et al., 2020; Smith, 2016), we conduct the PSM method to
control for observable differences in CEOs characteristics associated with firm performance.
We define the treatment (control) group as CEO tenure above the median and control firms
for others. We then stratify our data to match the treatment firms with control firms based on
the nearest matching point method. To test the quality of our PSM, we conduct t-tests to
compare the mean differences among the variables between the treatment and control groups
(Table 8, Panel A). Only the difference in firm performance (TOBINSQ) is statistically
significant (0.3547**, t = 2.19), while all other differences in observable CEO and firm
characteristics are insignificant, suggesting the balances in our covariates between the
groups. Finally, we rerun the baseline model based on the PSM estimates. Table 8 (Panel B)
consistently shows a significantly positive relationship between CEO tenure and firm
performance (0.1601**, t = 2.24).
Finally, we conduct Heckman two-stage selection analysis to mitigate sample selection
biases due to our manual data collection (Alsaadi, 2021; Heckman, 1979; Hill et al., 2020).
Following prior studies (Bui et al., 2021), we regress CEO tenure on all the control variables
in the first stage. We regress firm performance (TOBINSQ) in the second stage on the inverse
Mills ratio obtained from the first stage and all control variables as in our baseline model.
Table 9 shows Heckman two-stage selection approach results. We document a significantly
Table 8. CEO tenure and firm performance – propensity score matching (PSM) analysis Pacific
Accounting
Variable(s) Treatment firms Control firms Difference t-stat
Review
Panel A: Quality of propensity score matching (PSM)
Dependent variable
TOBINSQ 1.9881 1.6334 0.3547 2.19**
Control variable(s)
CEO_AGE 2.7315 2.7232 −0.0083 −0.31
CEO_GENDER 0.1045 0.1143 −0.0098 −0.39
CEO_FOUNDER 0.2647 0.2516 0.0131 0.37
CEO_DUAL 0.1470 0.1797 −0.0327 −1.09
SIZE 19.1230 19.2030 −0.0800 −0.51
LEV 0.2133 0.2290 −0.0157 −0.92
LOSS 0.1012 0.1112 −0.0100 −0.17
Panel B: CEO tenure and firm performance using PSM regressions
Variable(s) Model 1
Coefficient (t-value)
CEO_TENURE 0.1601** (2.24)
CEO_AGE −0.6911 (−0.45)
CEO_GENDER −1.1912*** (−3.89)
CEO_FOUNDER 0.2512 (1.19)
CEO_DUAL −0.4892** (−2.23)
SIZE −0.2611*** (−4.87)
LEV −1.9910*** (−4.27)
LOSS −0.0082 (−1.12)
Constant 8.5328* (1.84)
YEAR_FE Yes
INDUSTRY_FE Yes
Adj R2 0.1598
N 532

Note(s): Table 8 reports the regression results testing the relationship between CEO tenure and firm
performance following the propensity score matching approach. All variable definitions are in Appendix.
***, ** and * represent statistical significance at the 1, 5 and 10% levels, respectively (two-tailed tests)
Source(s): Authors’ calculation

positive relationship between CEO tenure and firm performance (0.0231***, t = 2.92),
supporting our main result.

5. Conclusion
This study investigates the impact of CEO tenure on firm performance and delves deeper into
the potential presence of a curvilinear relationship between CEO tenure and firm
performance. While conventional wisdom supports that longer CEO tenure enhances firm
performance through heightened experience and organizational familiarity, another body of
research presents contrasting findings, suggesting that extended CEO tenure could diminish
firm value. Given the conflicting evidence, this study aims to investigate this relationship in
the context of New Zealand. The New Zealand business context stands out as unique when
compared to other countries like the US. According to Ward (2014), the average CEO tenure
in New Zealand is notably shorter than that in the USA. Consequently, findings derived from
studies conducted in the US may not be directly applicable or generalizable to other
countries, including New Zealand. We employ a rich hand-collected data set of listed firms in
PAR Table 9. CEO tenure and firm performance – Heckman selection analysis

First stage Second stage

Variable(s) Coefficient (t-value) Coefficient (t-value)

DEP = CEO_TENURE DEP = TOBINSQ

CEO_TENURE – 0.0231*** (2.92)
CEO_AGE 4.1911*** (6.27) −6.8897** (−2.48)
CEO_GENDER 0.4426*** (2.69) −1.2531*** (−4.88)
CEO_FOUNDER 1.1711*** (8.11) −1.7912** (−2.47)
CEO_DUAL −0.0569 (−0.65) −0.0511 (−0.39)
SIZE −0.0412 (−1.52) −0.1825*** (−5.71)
LEV 0.0511 (0.29) −0.6518*** (−5.29)
LOSS −1.0029 (−0.29) −0.0036 (−0.19)
Inverse mill ratio −2.112** (−2.49)
Constant −16.2519*** (−7.19) 31.7641*** (2.88)
YEAR_FE Yes Yes
INDUSTRY_FE Yes Yes
Pseudo R2/Adj R2 0.1800 0.1803
N 1,522 1,522

Note(s): Table 9 reports the regression results testing the relationship between CEO tenure and firm
performance following the Heckman selection analysis. All variable definitions are in Appendix. ***, **
and * represent statistical significance at the 1, 5 and 10% levels, respectively (two-tailed tests)
Source(s): Authors’ calculation

New Zealand over 20 years (2000–2020) to investigate the relationship between CEO tenure
and firm performance.
We find that long-tenured CEOs link with firm performance measured by various market-
based and accounting-based proxies. We have also conducted relevant tests to mitigate
potential endogeneity concerns, including lagged variables, controlling for firm-fixed effects,
change analysis, PSM and Heckman two-stage selection. Our finding remains valid across
these tests. Importantly, we document that although a long-tenured CEO tends to improve
firm performance, which can be attributed to their increasing commitment, accumulating
skills and knowledge about the firm over time (Brochet et al., 2021), having a too long-
tenured CEO can be harmful to the firm. Indeed, we find an inverted U-shaped curve between
CEO tenure and firm performance, consistent with the theoretical work of Hambrick and
colleagues (Hambrick and Gregory, 1991) and several studies mainly in the USA (Brochet
et al., 2021; Huang and Hilary, 2018). This could be because staying too long in the firm may
provide such CEOs with more power and entrenchment that can create more conflicts of
interest which overweighs the benefits of the long tenure (Cao et al., 2021; Hambrick and
Gregory, 1991; Hermalin and Weisbach, 1998; Miller, 1991).
Our study can offer important practical implications regarding corporate governance
policies and practices. First, we provide empirical evidence of the positive link between CEO
tenure and firm performance, indicating the benefits of long tenure. As CEOs tend to become
more committed to the firm and accumulate relevant knowledge and skills which advance
their strategic decision-making over time, firms/boards of directors should have appropriate
strategies to improve their CEOs tenure. Second, we also find that long-tenured CEOs no
longer add value to firms up to a particular threshold. Instead, such long-tenured CEOs
prioritize their self-interest and exercise their entrenchment. Thus, firms should have
appropriate corporate governance to closely monitor such CEOs to mitigate potential
problems such as entrenchment or conflicts of interest. This is particularly important for New
Zealand or similar countries where the corporate governance regime is more principles- Pacific
based, and thus, there are no compulsory corporate governance guidelines (Sharma et al., Accounting
2021; Wu et al., 2022). As a result, CEOs may be under less pressure and oversight than their Review
peers in the USA or other rule-based countries.
It is also important to acknowledge certain limitations of our study, which can be
investigated further in future research. First, as the focus of our paper is on the relationship
between CEO tenure and firm performance and due to the limitation of our hand-collected
database, we do not examine the potential channels through which the impact can happen.
Future research can further explore such mechanisms as improved knowledge and skills, or
propensity to take risks as channels underlying the positive impact or overconfidence as
channels underlying the negative impact of CEO power (Brochet et al., 2021; Kaplan et al.,
2022; Simsek, 2007). Understanding the mechanisms can provide deeper insights into the
relationship. However, as informed from prior studies, these factors are usually measured by
collecting primary data from surveys or interviews, which are beyond the scope of this study.
Consequently, we acknowledge this as a limitation of our study. Second, although we have
controlled for various CEO characteristics such as age, gender, founder and duality as
following prior studies, there can be other characteristics that can affect the CEO tenure-firm
performance relationship, such as their relevant skill set (generalist versus specialist CEOs)
(Custódio et al., 2013; Li and Patel, 2019). Due to data limitations, we cannot control such
factors in our models, and therefore, we encourage future studies to take these factors into
account better to understand the relationship between CEO tenure and firm performance.
Our findings should be interpreted with caution when applied to different geographic
regions and regulatory regimes. For instance, the presence of business groups or family firms
could potentially influence the relationship between CEO tenure and firm performance. Kim
and Kiymaz (2023) highlight that in India, nearly 48.8% of CEOs are founders within
business groups, and they report a positive relationship between founder CEOs and firm
performance, particularly in such contexts. This suggests that CEO tenure may have different
implications in business groups, especially when the CEO is a founder, compared to non-
founder CEOs. These differences in the role of the CEO, as well as variations in governance
frameworks, are likely to influence how CEO tenure impacts firm performance. Our study
focuses on the New Zealand context, which has distinct governance practices, but future
research could expand on this by exploring how the tenure-performance relationship varies
between founder and non-founder CEOs, especially across different governance
environments and business contexts. Understanding these dynamics could provide a more
nuanced view of how CEO tenure affects firm performance in diverse settings.

Note
1. [Link]/country-comparison-tool?countries=new+zealand%2Cunited+states

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Further reading
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Corresponding author
Md. Borhan Uddin Bhuiyan can be contacted at: [Link]@[Link]
 PAR
Table A1. Variable definitions
Appendix

Variable(s) Label Description Source

Dependent variable
Firm TOBINSQ The sum of the market value of equity plus the book value of total debt scaled by total Thomson Reuters Eikon (and
performance assets calculated)
Independent variable(s):
CEO tenure CEO_TENURE Number of years the CEO has been serving as the firm’s CEO Annual reports (hand
collected)
Ln Annual reports (and calculated)
(CEO_TENURE)
Control variables
CEO age CEO_AGE Firm CEO’s age measured in years Annual reports (hand
collected)
CEO gender CEO_GENDER Indicator variable that equals 1 if the CEO’s gender is female and 0 otherwise Annual reports (hand
collected)
CEO founder CEO_FOUNDERIndicator variable that equals 1 if the CEO is the founder of the company and 0 otherwise Annual reports (hand
collected)
CEO duality CEO_DUAL Indicator variable that equals 1 if the CEO is also the Chairman of the board and 0 Annual reports (hand
otherwise collected)
Firm size SIZE Natural logarithm of total assets Thomson Reuters Eikon (and
calculated)
Leverage LEV Total debt divided by total assets Thomson Reuters Eikon (and
calculated)
Profitability LOSS Indicator variable that equals 1 if the firm reported loss and 0 otherwise Thomson Reuters Eikon (and
calculated)
Year fixed YEAR_FE A vector of dummy variables indicating year Thomson Reuters Eikon
effects
Industry fixed INDUSTRY_FE A vector of dummy variables indicating industry Thomson Reuters Eikon
effects
(continued)
Table A1. Continued

Variable(s) Label Description Source

Additional test variables:

Return on ROA Net income divided by total assets Thomson Reuters Eikon (and
assets calculated)
Basic earning BEP The ratio of earnings before interest and tax (EBIT) to total assets reported in a financial Thomson Reuters Eikon (and
power ratio year calculated)
Market HHI A proxy of market competition based on the Herfindahl-Hirschman Index and the value Thomson Reuters Eikon (and
competition range between 0 and 100 calculated)
Audit quality BIG4 An Indicator variable that equals 1 if the firm is audited by BIG4, and 0 otherwise Thomson Reuters Eikon and
annual report (and calculated)
Firm age New/OLD Number of years since the company is founded. We categorize firms into two groups – Thomson Reuters Eikon and
new and old – based on the mean age of firms in the sample annual report (and calculated)
Firm life cycle MATURE Firm Life Cycle is measured as a ratio of retained earnings (RE) scaled by total assets Thomson Reuters Eikon (and
(TA). A value greater than 1 is a mature firm, 0 otherwise calculated)

Source(s): Authors’ calculation

Review
Pacific
Accounting