The Effect of CEO Tenure on Foreign Ownership

We investigate the effect of CEO tenure on foreign ownership in the Korean stock market. Using KOSPI-listed companies, the results show a significant negative relation between CEO tenure and foreign ownership. This suggests that foreign investors may perceive long-tenured CEOs as a sign of weakened internal controls and entrenchment, which reduces the attractiveness of such firms for investment. Additional analysis reveals that CEO tenure moderates the relationship between firm characteristics and foreign ownership. Specifically, a longer CEO tenure weakens the negative effect of information risk and strengthens the positive association between profitability and foreign ownership. However, CEO tenure does not significantly influence the relationship between foreign ownership and either earnings quality or audit quality. These findings imply that foreign investors evaluate CEO tenure in a nuanced manner, viewing it as both a potential risk and a strategic asset depending on the firm's internal conditions. The study provides important insights into how managerial characteristics affect foreign investor behavior, particularly in domestic markets with relatively weak governance structures. We provide the importance of transparent governance and internal controls, especially for firms led by long-serving CEOs.