LAUSR

We examine whether outside directors’ firm-specific accumulated knowledge in the forms of human and internal social capital benefitted the firm during COVID-19. Using a sample of 754 US firms during the COVID-19 collapse period, we find an inverted U-shaped relation between outside directors’ average board tenure and cumulative excess stock returns. Our result suggests that firms experienced optimal cumulative excess stock returns during COVID-19 when outside directors’ average board tenure is 10 years. We also find that the curvilinear relation is profound for outside directors with more internal social capital, suggesting that outside directors’ internal social capital plays a prominent role in enhancing board effectiveness during a crisis. Furthermore, we use several robustness checks to confirm the results. JEL Classification: D83, G30, G34, M41