Returnee CEOs Under Weak Institutions: Blessing or Curse?

58 Pages Posted: 25 Jan 2019

See all articles by Tinghua Duan

Tinghua Duan

IESEG School of Management

Wenxuan Hou

University of Edinburgh - Business School

Multiple version iconThere are 2 versions of this paper

Date Written: December 28, 2018

Abstract

This paper studies CEOs with overseas experience, known as returnee CEOs. We show that Chinese returnee CEOs are associated with inferior performance, lower market reactions to appointment announcements and an adverse regulatory environment. We argue that CEOs’ international expertise is acquired at the opportunity cost of local social capital, such as political and business ties, which is more critical than expertise in transition economies with weak legal institutions. The negative effect disappears when social capital is acquired, regional legal institutions are strong or returnees’ international expertise is in demand. Exploiting an exogenous increase in the supply of returnee talent as a result of new provincial policies, we find the results consistent.

Keywords: returnee, CEO, international experience, legal institutions, firm performance, social capital

JEL Classification: G15; G34

Suggested Citation

Duan, Tinghua and Hou, Wenxuan, Returnee CEOs Under Weak Institutions: Blessing or Curse? (December 28, 2018). Available at SSRN: https://ssrn.com/abstract=3312913 or http://dx.doi.org/10.2139/ssrn.3312913

Tinghua Duan

IESEG School of Management ( email )

Socle de la Grande Arche
1 Parvis de la Defense
Puteaux, Paris 92800
France

Wenxuan Hou (Contact Author)

University of Edinburgh - Business School ( email )

29 Buccleuch Place
EDINBURGH, Scotland EH89JS
United Kingdom

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