Chair-CEO age dissimilarity and firm value - evidence from China

PurposeThis study examines how age dissimilarity between the Chairman and Chief Executive Officer influences firm value. We also explore whether board monitoring intensity changes with the age dissimilarity between the Chair and CEO and whether it moderates the relationship between their age dissimilarity and firm value.Design/methodology/approachWe test our hypothesis by analysing 37,200 firm-year observations from 3,870 unique Chinese Stock Exchange-listed firms (2001-2021) using OLS, 2SLS Heckman and PSM methods.FindingsWe find that higher age dissimilarity in firms is associated with decreased firm value. Additionally, increased age dissimilarity between the Chair and CEO is linked to lower board meeting frequency (low board monitoring intensity), negatively impacting firm value. This effect is more pronounced in firms with higher agency conflict, low concentration, dispersed ownership and non-SOE. Our findings are consistent and robust across alternative measures and endogeneity tests.Research limitations/implicationsOur findings stress the policy importance of increasing board meeting frequency to enhance internal monitoring, mitigating potential negative impacts on firm value from age dissimilarity in top leadership roles.Originality/valueOur novel research emphasizes the unique influence of age diversity in top management roles (Chair and CEO) on firm strategy, coordination and communication - an understudied aspect of corporate governance. Our findings clarify the distinct impact of this factor on overall firm value.