Transporting Transparency: Director Foreign Experience and Corporate Information Environment
57 Pages Posted: 1 Jul 2016 Last revised: 14 Jul 2017
Date Written: July 1, 2017
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
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