Rookie Directors and Firm Performance: Evidence From China

67 Pages Posted: 24 Nov 2019

See all articles by Zonghao Chen

Zonghao Chen

Guangdong University of Foreign Studies - School of Finance

Michael O'Connor Keefe

Victoria University of Wellington

Date Written: November 1, 2019

Abstract

This paper examines the benefits and costs associated with rookie independent directors (RIDs) in Chinese public companies from 2008 to 2014. We find that RIDs attend more board meetings. Boards with more RIDs tunnel less to controlling shareholders, suggesting that RIDs are efficient monitors. However, in state-owned firms, the presence of RIDs is negatively associated with investment efficiency, suggesting a potential cost of appointing RIDs. Overall, firms with more RIDs have higher operating performance, especially when tunneling is a more common issue, when board experience is less important and when monitoring costs are relatively low.

Keywords: Rookie Directors, Firm Performance, China, Meeting Attendance, Tunneling

JEL Classification: G32, G34

Suggested Citation

Chen, Zonghao and O'Connor Keefe, Michael, Rookie Directors and Firm Performance: Evidence From China (November 1, 2019). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3484309

Zonghao Chen

Guangdong University of Foreign Studies - School of Finance ( email )

China

Michael O'Connor Keefe (Contact Author)

Victoria University of Wellington ( email )

P.O. Box 600
Wellington, 6140
New Zealand

Register to save articles to
your library

Register

Paper statistics

Downloads
40
Abstract Views
134
PlumX Metrics