Board Directors with Foreign Experience and Stock Price Crash Risk: Evidence from China

27 Pages Posted: 27 May 2020

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

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Date Written: October/November 2019

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 a firm fixed effects model, controlling for possibly omitted variables, and instrumental variable estimations. Moreover, we find that the negative association between BDFEs and crash risk is more pronounced for firms with more agency problems, weaker corporate governance, and less overall transparency. Our findings suggest that the characteristics of board directors matter in determining stock price crash risk.

Keywords: board directors, foreign experience, monitoring role, stock price crash risk

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 (October/November 2019). Journal of Business Finance & Accounting, Vol. 46, Issue 9-10, pp. 1144-1170, 2019, Available at SSRN: https://ssrn.com/abstract=3604488 or http://dx.doi.org/10.1111/jbfa.12400

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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