Independent Directors’ Characteristics and Performance: Evidence from China

40 Pages Posted: 19 Oct 2009

See all articles by Jing Liao

Jing Liao

Massey University

Martin R. Young

Massey University - School of Economics and Finance

Qian Sun

affiliation not provided to SSRN

Date Written: October 14, 2009

Abstract

Chinese listed firms recruit independent directors in order to build up connections with people who can provide useful sources and/or protection rather than for their monitoring of top managements. It is found that Chinese listed firms particularly prefer two types of Guanxi provided by independent directors: 43.76% of the independent directors are university scholars or researchers; and 13.88% of them are politically connected. Moreover, the relationship between Tobin’s Q and the presence of scholars and politically connected independent directors on boards is significantly negative. Furthermore, scholars, commercial bankers and politically connected independent directors can add value to large and diversified firms, high leveraged firms, and firms without political connections, respectively. Finally, the recruitment of independent directors does not reduce the related party transactions between the listed firms and their controlling shareholders, but instead, firms with politically connected CEOs, and firms with a government bureaucrat as the largest shareholder engage in less related party transactions.

Keywords: Independent director, Characteristic, Firm performance, China

JEL Classification: G34, G38

Suggested Citation

Liao, Jing and Young, Martin R. and Sun, Qian, Independent Directors’ Characteristics and Performance: Evidence from China (October 14, 2009). Available at SSRN: https://ssrn.com/abstract=1489088 or http://dx.doi.org/10.2139/ssrn.1489088

Jing Liao (Contact Author)

Massey University ( email )

Private Bag 11 222
Palmerston North, Manawatu 4442
New Zealand

Martin R. Young

Massey University - School of Economics and Finance ( email )

Private Bag 11222
Palmerston North, 4442
New Zealand

Qian Sun

affiliation not provided to SSRN ( email )

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