Transporting Transparency: Director Foreign Experience and Corporate Information Environment

57 Pages Posted: 1 Jul 2016 Last revised: 14 Jul 2017

See all articles by Guanmin Liao

Guanmin Liao

Renmin University of China - School of Business

Mark (Shuai) Ma

University of Pittsburgh - Accounting Group

Xiaoyun Yu

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

Date Written: July 1, 2017

Abstract

This paper examines how directors with foreign experience affect a firm’s information environment in emerging markets. Using a unique dataset and exploiting a natural experiment in China, we document a positive, causal effect of directors with foreign experience on the informativeness of share price. We examine potential channels, and find that after individuals with foreign experience join the board, earnings transparency increases, and firms are more likely to hire high-quality auditors and to engage in voluntary disclosure. Furthermore, an improved information environment brought by directors with foreign experience leads to a lower cost of equity financing and spills over to peer firms. These findings provide evidence on how board directors with foreign experience help shape corporate transparency in emerging markets.

Keywords: Corporate Governance, Board of Directors, Corporate Transparency, Information Environment, Human Capital

Suggested Citation

Liao, Guanmin and Ma, Mark (Shuai) and Yu, Xiaoyun, Transporting Transparency: Director Foreign Experience and Corporate Information Environment (July 1, 2017). 28th Annual Conference on Financial Economics and Accounting. Available at SSRN: https://ssrn.com/abstract=2803195

Guanmin Liao

Renmin University of China - School of Business ( email )

No. 59 Zhongguancun Street, Haidian District
Beijing, Beijing 100872
China

Mark (Shuai) Ma (Contact Author)

University of Pittsburgh - Accounting Group ( email )

United States

Xiaoyun Yu

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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