Board Independence and Firm Performance in China

58 Pages Posted: 10 Dec 2014

See all articles by Yu Liu

Yu Liu

University of Texas at El Paso

Mihail K. Miletkov

University of New Hampshire - Paul College of Business and Economics

Zuobao Wei

University of Texas at El Paso

Tina Yang

University of South Florida

Date Written: December 9, 2014

Abstract

We provide the first comprehensive and robust evidence on the relationship between board independence and firm performance in China. We find that independent directors have an overall positive effect on firm operating performance in China. Our findings are robust to a battery of tests, including endogeneity checks using instrumental variables, the dynamic generalized method of moments estimator, and the difference-in-differences method. The positive relationship between board independence and firm performance is stronger in government controlled firms and in firms with lower information acquisition costs. We also document that Chinese independent directors play an important role in constraining insider self-dealing and improving investment efficiency.

Keywords: Independent directors, Firm performance, Monitoring costs, Tunneling, Investment efficiency, China

JEL Classification: G34, G38, K22

Suggested Citation

Liu, Yu and Miletkov, Mihail K. and Wei, Zuobao and Yang, Tina, Board Independence and Firm Performance in China (December 9, 2014). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2536020

Yu Liu

University of Texas at El Paso ( email )

El Paso, TX TX

Mihail K. Miletkov (Contact Author)

University of New Hampshire - Paul College of Business and Economics ( email )

10 Garrison Ave
Durham, NH 03824
United States

Zuobao Wei

University of Texas at El Paso ( email )

500 W. University Ave.
El Paso, TX 79968
United States
915-747-5381 (Phone)
915-747-6282 (Fax)

Tina Yang

University of South Florida ( email )

140 7th Ave S
St. Petersburg, FL 33701
United States
7278734568 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
362
Abstract Views
2,248
rank
88,004
PlumX Metrics