Board Structure, Director Expertise, and Advisory Role of Outside Directors

66 Pages Posted: 24 Feb 2018 Last revised: 13 Nov 2019

See all articles by Sheng‐Syan Chen

Sheng‐Syan Chen

National Chengchi University

Yan-Shing Chen

National Yunlin University of Science and Technology

Jun-Koo Kang

Nanyang Technological University (NTU) - Nanyang Business School

Shu-Cing Peng

National Central University at Taiwan - Department of Finance

Date Written: October 21, 2019

Abstract

We investigate how a shock to corporate demand for experienced directors (i.e., U.S. Congress’ grant of Permanent Normal Trade Relations status to China in 2000) affects U.S. firms’ board structure and board advisory role. We find that firms appoint more outside directors with China-related experience after the grant. Firms with such directors realize higher returns around announcements of investments involving Chinese firms and better post-deal operating performance, particularly when these directors reside in the U.S. The appointment of directors with China experience is also greeted more positively by the stock market and they gain more board seats after the grant.

Keywords: Permanent normal trade relations, China-related experience, Board structure, Advisory role, Investment decision, Announcement return, Operating performance, Director labor market

JEL Classification: G14, G32, G34, O24

Suggested Citation

Chen, Sheng-Syan and Chen, Yan-Shing and Kang, Jun-Koo and Peng, Shucing, Board Structure, Director Expertise, and Advisory Role of Outside Directors (October 21, 2019). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=3128764 or http://dx.doi.org/10.2139/ssrn.3128764

Sheng-Syan Chen

National Chengchi University

No. 64, Sec. 2, ZhiNan Rd., Wenshan District
Taipei 116, 116
Taiwan

Yan-Shing Chen

National Yunlin University of Science and Technology ( email )

1, Roosevelt Rd. Sec 4
Taipei, Taiwan
Taiwan
+886-2-33661078 (Phone)

Jun-Koo Kang

Nanyang Technological University (NTU) - Nanyang Business School ( email )

Nanyang Avenue, Block S3-01b-54
Singapore, 639798
Singapore
(+65) 6790-5662 (Phone)
(+65) 6791-3697 (Fax)

HOME PAGE: http://www.nbs.ntu.edu.sg/nbs_corporate/divisions/bnf/index.asp

Shucing Peng (Contact Author)

National Central University at Taiwan - Department of Finance ( email )

No. 300, Jung-da Rd.
Jung-Li
Taoyuan
Taiwan

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