Board Directors With Foreign Experience and Stock Price Crash Risk: Evidence From China

44 Pages Posted: 26 Mar 2018

See all articles by Feng Cao

Feng Cao

Hunan University - Business School

Jian Sun

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

Rongli Yuan

Renmin University of China - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 26, 2017

Abstract

This study examines the impact of board directors with foreign experience (BDFEs) on stock price crash risk. We find that BDFEs help reduce crash risk. This association is robust to a series of robustness checks, including firm fixed effects model, Heckman procedure, instrumental variable estimation, propensity score matching (PSM) procedure, change analysis, and an exogenous shock. Moreover, we find that the imprinting effect and eyeball effect are the underlying mechanisms by which BDFEs affect crash risk. The results still hold after controlling for managerial ability of BDFEs and corporate governance effect. Our findings suggest that the characteristics of board directors matter for stock price crash risk.

Keywords: Board Directors, Foreign Experience, Stock Price Crash Risk, Imprinting Effect, Eyeball Effect

JEL Classification: G34, G38

Suggested Citation

Cao, Feng and Sun, Jian and Yuan, Rongli, Board Directors With Foreign Experience and Stock Price Crash Risk: Evidence From China (December 26, 2017). Available at SSRN: https://ssrn.com/abstract=3148447 or http://dx.doi.org/10.2139/ssrn.3148447

Feng Cao (Contact Author)

Hunan University - Business School ( email )

109 Shijiachong Road
Changsha, Hunan 410006
China

Jian Sun

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

Beijing
China

Rongli Yuan

Renmin University of China - School of Business ( email )

Beijing
China

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