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Director age and corporate innovation: Evidence from textual analysis

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  • Chindasombatcharoen, Pongsapak
  • Chatjuthamard, Pattanaporn
  • Jiraporn, Pornsit
  • Treepongkaruna, Sirimon

Abstract

Motivated by agency theory and resource dependency theory, we explore whether director age influences firm’s innovation. Using textual-based innovation measures proposed by Bellstam, Bhagat and Cookson (2019), we find that older directors impede the firm’s innovation. Our findings are robust to additional analyses including 2SLS instrumental variable and GMM dynamic panel data estimations and unlikely to be driven by unobserved heterogeneity. We provide evidence supporting agency theory where information asymmetry inherent in innovation investment leads to substantial agency costs.

Suggested Citation

  • Chindasombatcharoen, Pongsapak & Chatjuthamard, Pattanaporn & Jiraporn, Pornsit & Treepongkaruna, Sirimon, 2023. "Director age and corporate innovation: Evidence from textual analysis," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    • Handle: RePEc:eee:beexfi:v:37:y:2023:i:c:s2214635022001010
    DOI: 10.1016/j.jbef.2022.100779
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    More about this item

    Keywords

    Corporate innovation; Director age; Agency theory; Resource dependency theory; Corporate governance; Textual-based innovation measures;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • M19 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Other
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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