From Classroom to Boardroom: The Value of Academic Independent Directors

47 Pages Posted: 25 Aug 2018 Last revised: 7 Feb 2020

See all articles by Jiaren Pang

Jiaren Pang

Tsinghua University - School of Economics & Management

Xinyi Zhang

Sun Yat-sen University (SYSU) - School of Business

Xi Zhou

Peking University - Guanghua School of Management

Date Written: November 1, 2017

Abstract

Academic independent directors account for a significant fraction of boards of directors and play important roles. Using Chinese data, we find that stock prices drop by 1.39% following unexpected resignations of academic independent directors due to the ambiguity of a regulation, and by 1.74% following another regulation that explicitly prohibits professors with administrative positions from serving as independent directors. Cross-sectional tests show that the market reacts more negatively when the affected academic director holds more subcommittee chair positions or directorships, assumes a position on the board before the current CEO is in charge, comes from a top-tier university, has high-quality foreign academic experience, or works for firms that are in greater need of monitoring and advisory services. The results from the two samples are broadly consistent. We also offer some explanations for the prevalence of academic independent directors in China. Overall, our results indicate that academic independent directors in China create value for shareholders through both monitoring and advising.

Keywords: Academic Independent Director, Board of Directors, Government Regulation, Document No. 18

JEL Classification: G30, G38

Suggested Citation

Pang, Jiaren and Zhang, Xinyi and Zhou, Xi, From Classroom to Boardroom: The Value of Academic Independent Directors (November 1, 2017). Available at SSRN: https://ssrn.com/abstract=3232670 or http://dx.doi.org/10.2139/ssrn.3232670

Jiaren Pang (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Xinyi Zhang

Sun Yat-sen University (SYSU) - School of Business ( email )

135 Xingang West Road
Sun Yat-Sen University
Guangzhou, Guangdong 510275
China

Xi Zhou

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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