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The Brain Gain of Corporate Boards: Evidence from China

82 Pages Posted: 1 Dec 2011 Last revised: 14 May 2014

Mariassunta Giannetti

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance

Guanmin Liao

Central University of Finance and Economics - School of Accountancy

Xiaoyun Yu

Indiana University - Kelley School of Business - Department of Finance; China Academy of Financial Research (CAFR)

Date Written: December 1, 2013

Abstract

We study the impact of directors with foreign experience on firm performance in emerging markets. We use a unique dataset from China and exploit that at different times, Chinese provinces introduced policies to attract highly talented emigrants. These policies led to an increase in the supply of Chinese individuals with foreign experience in the local labor market and ultimately increased the likelihood that firms in these provinces had directors with foreign experience in comparison to similar firms elsewhere. We document that valuation, productivity, and profitability increase after firms hire directors with foreign experience. Furthermore, corporate governance improves and firms are more likely to make international acquisitions, to export, and to raise funds internationally. These findings suggest a channel through which the emigration of the best and brightest may lead to a brain gain and provide first time evidence on how board directors transmit knowledge on management practices and corporate governance to firms in emerging markets.

Keywords: Corporate Boards, Corporate Governance, Human Capital, Firm Performance, Firm Productivity

JEL Classification: D22, D80, F21, F22, G30, J24

Suggested Citation

Giannetti, Mariassunta and Liao, Guanmin and Yu, Xiaoyun, The Brain Gain of Corporate Boards: Evidence from China (December 1, 2013). Journal of Finance, Forthcoming; Asian Finance Association (AsFA) 2013 Conference; ECGI - Finance Working Paper No. 343/2013. Available at SSRN: https://ssrn.com/abstract=1966996 or http://dx.doi.org/10.2139/ssrn.1966996

Mariassunta Giannetti

Stockholm School of Economics ( email )

P.O. Box 6501
Sveavagen 65
SE-113 83 Stockholm
Sweden
+46 8 736 9607 (Phone)
+46 8 312 327 (Fax)

HOME PAGE: http://sites.google.com/site/mariassuntagiannetti/Home

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Guanmin Liao

Central University of Finance and Economics - School of Accountancy ( email )

No. 39, South College Road, Haidian District
Beijing, 100081
China

Xiaoyun Yu (Contact Author)

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3521 (Phone)
812-855-5875 (Fax)

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

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