Director age and corporate innovation: Evidence from textual analysis

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.